Let’s look at an example of two friends – Dave and Wayne - who hired on with a big company just after finishing school. They both bought nice new homes in a new subdivision, for $100,000.

Dave had a paper route as a kid, and was able to save $20,000 for a down payment (20. After 15 years (half way through the term of the loan) Wayne still owed about $59,000 ($59,215.09, to be exact).

But Dave, being the frugal kind of guy he was, had been making extra payments toward principal every month. He faithfully paid $100 extra per month, every month, for 15 years. So, he owed $18,000 less than Wayne on his mortgage, or about $41,000.

Over those 15 years, their homes had appreciated about 5 percent annually.

Now, their homes were worth $200,000 each!

Lo and behold, the big employer they both worked for ran into trouble, and there were rumors of layoffs.

Dave felt pretty smug, because he was actually a great employee with lots of seniority, so he wasn’t too worried about being laid off. Wayne, on the other hand, wasn’t so sure. Oh, he was also a great employee; he just didn’t trust the big company as much as Dave did. After all, he had several friends who had been laid off from other companies, and those friends felt safe, too – until the axe fell.

Wayne decided to refinance his home, just in case the layoffs came. In fact, he refinanced 100. Oh, and his new mortgage rate was 5 decline, which would represent a major correction), the buyer still got a great deal.

And the bank got a bargain – they owned the house for $59,000 (the mortgage balance) and sold it for $99,000, a $40,000 gain. And Dave?

Well, let’s just say Dave’s not really happy about living in his sister-in-law’s basement, penniless.

Oh, and what about Wayne? Let’s see. Wayne now owes $200,000 on his property, which is also valued at $200,000. He has a $140,000 savings account earning 5.

His new side account, invested very safely and conservatively in a tax-free investment vehicle, is earning $583.33 a month (a 5% annual yield). So, Wayne has to take an additional $250.00 per month out of his $140,000 account in order to make his mortgage payment.

Of course, his mortgage interest is tax-deductible, so he’ll get a $10,000 reduction in his income when tax time rolls around. Even with taxable unemployment compensation and any other odd-job income Wayne’s able to scrape up, he probably won’t be paying much (if anything) in taxes.

Unemployment compensation is taking care of groceries and other incidental expenses, and Wayne is staying in his home (which ultimately will continue to increase in value).

By the way, even if Wayne did this for 15 years, he’d still have $73,000 in his side account.

Sure, unemployment would run out, and maybe Wayne picks up a job at Wal-Mart to pay for his groceries and other household stuff. But ultimately, Wayne will get a job that puts him back in the saddle, and his side fund will grow, and grow, and grow – eventually so much that there’s more than enough in his side account to liquidate his mortgage, if he ever wanted or needed to.

So you tell me – as you pay down the principal balance of your home loan, either through your regular mortgage payments, or through paying extra money toward principal, do you feel like that equity you’re building up is ‘safe’ and ‘accessible’?

Or, is it safer and more accessible if you keep it in a liquid side fund, where it also creates a return on your investment?