What is home equity?
Equity in a home is the amount that the house is worth minus the amount of money left to be paid on the loan. If a house has a significant portion of the mortgage loan paid off, the owner can take out what is often called a "home equity line of credit", also known as a second mortgage.
These second mortgage loans or home equity loans are often used for home improvement or renovation, which is often required by the terms of the loan, but not always. Sometimes the loans can be used for whatever you choose to spend them on, such as college education or medical bills.
If a homeowner's mortgage is fully paid off, the equity would be the amount that the house is worth. Taking out a mortgage at this point is called a reverse mortgage, which you can learn about in my article on reverse mortgages.