Real estate equity is the difference between the value of your property and the amount you owe against it. For most realty owners, particularly homeowners, equity has risen rapidly during the last few years as property values have escalated.

Smart owners realize that their "idle equity" serves no purpose, and they want to put it to work. To illustrate, suppose your home is worth $100,000 and you owe $40,000 on its mortgage. Your unproductive "idle equity" is $60,000. There are four basic ways to unlock this equity:

(1) Sell the property. If you sell the property, whether it is your home, investment or business property, your equity will be released. An all-cash sale will give you cash to invest elsewhere. But a sale can mean you'll owe profit tax to Uncle Sam, unless the sale qualifies for tax deferral.

However, if you make an installment sale by helping finance the buyer's purchase, such as a deferred-payment sale, the sale usually is less highly taxed than an all-cash sale.

But the big drawback of selling is that the owner loses the property's benefits. If it's your home, you lose its use as well as probable future appreciation in market value. If the property is held for investment or business use, you lose the depreciation tax shelter and market value appreciation. For these reasons, most property owners don't want to sell to unlock their idle equity.

(2) Refinance the mortgage. A better alternative for most property owners wanting to unlock their equity is to refinance their mortgage (except in Texas where personal residence refinancing is barred by law). Cash produced from refinancing is tax-free. Homeowners particularly like this refinance advantage.

Some mortgage lenders now are offering below-market-interest-rate refinancing. The reason is that lenders want to get old, low-interest rate mortgages off their books.

For example, many S&Ls with old loans at 9 percent interest rates or below offer to refinance at 11 or 12 percent interest as a refinance incentive for their borrowers. These rates are below the interest rate on most new mortgages.

But refinancing won't unlock the owner's entire idle equity. Normally, first mortgage lenders will only loan on refinances up to 75 percent or 80 percent of today's market value of the property. That leaves the owner with 20 percent or 25 percent remaining equity which isn't producing any return.

(3) Look to second mortgages as an alternative. If attractive terms are not available for refinancing an existing low-interest-rate first mortgage, many property owners leave it alone and add a second mortgage instead. The cash produced is about the same as is produced by refinancing the old first mortgage.

To illustrate, suppose the $40,000 first mortgage on your $100,000 home carries a low 8 percent interest rate. Depending on the amount of idle equity you want to unlock, you might be better off adding a second mortgage rather than refinancing. Many second mortgage lenders loan up to 80 percent of the property's market value, occasionally more.

Interest rates on second mortgages vary widely between lenders and geographical location. Usury laws limit availability in a few states. Lenders to consider for second mortgages include banks, S&Ls, mortgage brokers, finance companies, credit unions and individual lenders. Only by shopping the local second mortgage market can the best terms be located.

(4) Create your own mortgage. If your purpose for unlocking your property equity is to buy more real estate, the cheapest way to use that equity is to write your own mortgage. Then use that mortgage as your down payment on the property you want to buy.