TOP TEN BEST

1. To make improvements to the house you live in. There's nothing like borrowing money to improve your home. Additions or improvements invariably add value to your property, and using your own equity to do it is a wise decision. Besides, banks will almost always approve these kinds of loans.
2. To pay off credit card or installment debt. Typically, credit card debt is at a much higher interest rate than home equity or mortgage debt. It is just simple arithmetic to conclude that paying off that $3000 to $5000 at 14.9% (which will take many years if you make just the minimum payments) with money at 3-6% (which you're borrowing against the value of your home which may be rising in value at a faster rate).
3. To invest in rental property. Instead of paying cash to buy rental property, taking the money out of your built-up equity is a good idea if the numbers work. If you can take in enough in rental income to cover the loan plus insurance, taxes, repairs and any other fixed costs, it's a win-win. You keep building, or rebuilding your original equity while pyramiding it into more income and equity.
4. To pay off taxes. The tax man can kill you, whether it's property taxes, income taxes or some other exotic scheme the government has cooked up to fleece us, plus, they all government entities have provisions for interest and penalties to be added to what you owe. If you have a tax debt, better to pay it off and get some peace of mind.
5. To start a new business. If you've got plenty of equity and won't put your entire investment at risk, this is a go, especially if it's a business you are going to be personally involved in and you plan on working from home. Nothing better than getting a super low cost loan to start up an enterprise that could potentially keep you out of debt forever.
6. Paying for eductional costs. If you are going to take a course or go to school to better yourself and possibly get a better, higher-paying job, this is a no-brainer. Or, if one of your kids is going to college, home equity loans are usually offered at lower rates than college loans.
7. To buy gold or gold coins. Though not advisable, gold or gold coins have shown a pretty substantial return on investment over the years, plus they're instantly redeemable for cash. A little risky, but possibly a great investment in these uncertain times.
8. To put into a 401K or other retirement plan. Check with a tax professional on this one, but, if you can cover the cost of the loan payments without fail, throwing a little extra into a retirement plan which will be untaxed may be a solid move.
9. To put money into a completely secure fixed rate investment that will return more interest than the cost of the loan. If you can find a bond without risk that pays more than the interest on your loan, please let the rest of us know. Obviously, there's no free lunch, and a completely safe investment is also a pipe dream, though there are many who have made an extra percent or more doing this. It's risky, but the risk is low if you know what you're doing. The concept is essentially "free money."
10. You have extra money coming soon but you want it now. If you are guaranteed to be getting a chuck of money in the near future (say 6 to 12 months) - bond maturity, estate settlement, guaranteed job bonus, etc. - there's no reason not to tap into your equity now provided you will pay the loan off entirely when the windfall does occur.

TOP TEN WORST

1. To help pay living expenses until you find a new job. This is the classic triple whammy. Not only are you not bringing in income, you are lowering your net worth and going further into debt on your most basic necessity.
2. To take a vacation. Ever wonder why banks encourage this? Because people are stupid enough to do it. Let's see, I can't afford a vacation unless I take some of the value out of the home I'm still paying for. Yeah, that's a winner. If you can't afford a vacation, it means you need to either work harder, find a better job or get a second or third income.
3. To buy a new car. On the surface, this sounds like a good idea because car loans are usually more expensive than home equity loans. But, that's not always true. Many new car loans - if yor credit is good - are at 0 or 1 to 2%, for a short term (5-6 years). An equity loan will likely be at a higher rate for a longer term.
4. To pay medical or health costs. If you're sick and can't afford care, you're probably not working either. It's likely better to have the hospital or HMO ruin your credit by not paying them, rather than have the money in your home tied up. The scenarios are frightening. You could stay ill and lose your home, or die and your estate gets nothing. The bank, doctors, hospitals win, you lose.
5. For a better standard of living. This makes absolutely no sense. If you want a plasma TV, new snowmobile or other "toys" to enhance your keeping up with the Joneses, taking the money out of your home is ludicrous and stupid. If you can't afford the extras in life without going into debt, you don't deserve to have them. Besides, all these things depreciate, while your home likely will appreciate. Your money is going in reverse.
6. To pay for regular living expenses. Here's the classic trap. You or your spouse loses his/her job and you borrow on your home "to make ends meet." Problem with this is that the ends may never meet. You'll keep borrowing instead of making the necessary changes in lifestyle to fit your economic condition. Cutting your expenses to the bone and possibly selling your house to move into a more affordable one are better options.
7. To help somebody else out. Whether it be a family member of friend, throwing away the equity in your home on the promise of repayment by somebody in desperate straits is not a very bright idea. Ask a banker how much he'd loan you if you REALLY needed it. Get the picture?
8. To invest in the stock market. It simply doesn't get any dumber than this.
9. Because you just want extra cash. Well, I guess it does get dumber.
10. If you have come here with some harebrained idea about using the equity in your home, it probably belongs here.