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When buying a second home, equity refers to the difference between the home's market value and any outstanding mortgage balance. If you already own a home, you can leverage its equity to finance the purchase of a second property. For example, if your first home is worth $300,000 and you owe $200,000, you have $100,000 in equity. You can use this equity as a down payment or to secure a loan for the second home. It's essential to consider factors like your financial stability and market conditions, as using equity can increase your debt load. Proper planning can help make this investment worthwhile.