Lorrie Miller, Ocean County NJ Real Esate

5. To use in emergencies

Lenders and even some financial advisers recommend taking out a home equity loan while you're employed. That way, if you lose your job, you have cash on hand.

I can hear some of you saying, "Desperate times call for desperate measures." But listen to this: Using borrowed money to pay for everyday expenses is adding trouble on top of trouble.

How will you get by, you ask? You will. My grandmother, Big Mama, never made more than $13,000 a year as a nursing assistant. Yet she managed to raise five grandchildren and pay her bills-on time, all the time-without tapping into the equity in her home.

If you're living well now, put aside rainy-day funds. Then, if your situation changes, you won't have to rely on debt.

4. To invest

Don't even go here. Buying stocks and bonds with savings is investing. Buying them with borrowed money is called gambling, and if you ante up with home equity money, it's gambling with your house.

Of course, gambling is popular. The Federal Reserve Board found that in 2001 and the first half of 2002-the most recent period it reviewed-11 percent of mortgage refinancing funds were put into stocks and other financial investments. That's up from less than 2 percent during the two years prior.

Here's the problem: Interest rates on home debt are hovering around 4 to 5 percent for a line of credit and 7 to 8 percent for a loan-still low by historical standards. But if interest rates rise, what you owe may increase at a faster rate than your investments. You lose; the bank wins.

3. To pay for college

Americans have a weak spot when it comes to sending children to college. But by the time your kids are grown, you should be shedding debt to prepare for retirement, not piling it on. If your child is already college age-and you neglected to save in advance-there are alternatives to borrowing against your house. Consider state schools, which generally cost less than private ones; your kids may even be able live at home. And apply for financial aid, no matter how much you make. If your income is low enough, you may also qualify for low-interest federal loans (though I don't recommend other college loans, which come with credit card-size interest rates).

Better yet, don't let home equity debt be your last resort because you failed to save for your child's education. When your kid is young, open a 529 college savings plan, which allows your money to grow tax-deferred and leaves your gains untaxed as long as you put it toward education. To learn more, go to SavingforCollege.com.

2. To pay off a credit card

The average American household owes $9,840 in credit card debt, but I have met people who owe their entire annual income or more-often at a double-digit interest rate. To these people, a home equity loan looks downright reasonable.

But if they haven't mended their spendthrift ways, a home loan won't help them. A study in the late '90s found that nearly two-thirds of those who took a home loan to pay off credit cards resorted to their cards again within two years.

The worst-case scenario gets uglier. Home equity loans are "secured debt." Should you file for bankruptcy, you could lose your house. Credit card debt, because it's not backed by an asset, is "unsecured," and in a Chapter 7 bankruptcy proceeding can be wiped away.

Instead of shuffling credit card spending to a home-backed loan, take advantage of one of those come-ons you get in the mail offering low (or no) interest on balance transfers. Pick one with a low transfer fee, if any, and then do not, under any circumstances, buy stuff with the new card. The interest rate on new purchases tends to be much higher than that on transfers.

1. To buy a car
I cringe when homeowners say, "I paid off my car loan with a home equity loan." First, I need to point out: You have not "paid off" the car loan. You've only shifted the debt to your house, thereby increasing the liability on what may be your biggest asset.

If the interest rates on both loans are about the same, the home loan might save you a few hundred dollars when you figure in the tax deduction.

But there's a catch: Most home equity lines of credit carry a variable rate-when some financial benchmark like the prime interest rate moves up, the interest charged on your home equity line also rises. Lately, the prime rate has been increasing.

So why not use a home equity loan with a set interest rate? Because the house loan's term-how long you have to pay it back-is five to 10 years longer than the average five-year auto loan, so you end up paying more interest over the life of the home loan, erasing any savings from the tax deduction.

If you want a good deal on a car, keep your credit rating up so that you can qualify for one of the zero-interest loans being offered by auto dealers, who are desperate to sell cars these days.