No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.
In today’s competitive housing market, many American homeowners are exploring ways to upgrade or relocate without giving up their current property right away. One increasingly popular strategy is using equity to buy your next home without selling first. This approach allows you to tap into the value of your existing home to fund a new purchase, giving you flexibility, speed, and control over your real estate journey. This guide will break down how this strategy works, financing options available, pros and cons, and tips to make it work for you.
Home equity is the difference between your home’s value and the amount outstanding on your loan. For example, if your home is worth $600,000 and your mortgage balance is $250,000, you have $350,000 in equity. This equity can be accessed through various financial products to help fund the purchase of another property.
The main advantage of using equity to buy your next home without selling first is the ability to act quickly in a fast-moving market. You can secure your next home without rushing to sell your current one, giving you time to prepare it for sale.
There are several ways to access your equity, each with its own advantages and considerations.
A HELOC is a revolving credit line that allows you to borrow from your home’s equity as needed, up to a set limit, and pay interest only on the amount you use.
A home equity loan is a type of financing in which you can borrow from your home’s equity, and is repaid over time with fixed monthly payments.
A cash-out refinance replaces your current home loan with a new one for a higher amount. The difference between the old and new loan amounts is paid to you in cash.
Bridge loans are short-term loans that help cover the gap between buying a new home and selling your current one.
You can typically borrow up to 80% to 85% of the appraised value of your home, minus your outstanding mortgage balance. This is known as your loan-to-value (LTV) ratio.
This money could be used toward the down payment, closing costs, or even the full purchase of a new home, depending on your goals.
To qualify for equity-based financing, lenders typically assess:
| Credit Score | A score of 620+ is usually required, but 700+ gets better rates. |
| Debt-to-Income Ratio | Should be below 43% for most conventional loans. |
| Income Verification | Proof of stable income or employment. |
| Property Appraisal | Determines your home’s current market value. |
| Equity | Minimum 20% equity is often required. |
Be sure to weigh the perks and drawbacks of using home equity to purchase your next home before selling.
To make using equity to buy your next home without selling first a smooth experience, consider these strategies:
Speak with a mortgage broker or lender to understand your borrowing power and available equity. Mortgage pre-approval strengthens your offer on a new home.
An experienced real estate agent can help you time your purchase and sale, negotiate favorable terms, and identify properties that fit your budget.
They can help you assess the long-term impact of carrying two properties and advise on rental income strategies or tax implications.
Plan for the possibility of owning two homes temporarily, including mortgage payments, utilities, property taxes, and maintenance.
If you’re not ready to sell your current home, renting it out can generate income to offset expenses and build long-term wealth.
Consider the following to determine whether using equity to buy your next home before selling is right for you:
| Suitable If … | Not Suitable If … |
| You’re a homeowner with strong equity, stable income, and a clear plan for selling or renting your current home. It’s especially useful in competitive markets where buying opportunities are time-sensitive. | Your finances are tight or if your current home may take time to sell. In this case, it’s wise to consult a financial advisor or mortgage professional before proceeding. |
Can I buy a new home before selling my current one?
Yes, if you have enough equity and meet lender requirements, you can use that equity to finance your next home without selling first.
What financing options let me access home equity?
Common options include HELOCs, home equity loans, cash-out refinancing, or bridge loans.
What is a HELOC and how does it work?
A HELOC is a revolving line of credit secured by your home’s equity. You can borrow as needed and repay over time, often with interest-only payments during the draw period.
What’s the difference between a HELOC and a home equity loan?
A HELOC offers flexible borrowing like a credit card, while a home equity loan provides a lump sum of money that is repaid in fixed installments.
How much equity do I need to qualify?
Most lenders require at least 20% equity in your current home, and you can typically borrow up to 80% to 85% of its appraised value.
Is a cash-out refinance a good option for buying another home?
It can be, especially if interest rates are favorable. You replace your existing mortgage with a larger one and receive the difference in cash.
How do lenders calculate how much equity I can access?
They use the property’s appraised value and subtract your current mortgage balance, then apply a loan-to-value (LTV) cap.
What is a bridge loan and when is it used?
A bridge loan is a short-term loan that helps you buy a new home before selling your current one. It’s ideal for timing gaps but comes with higher interest rates.
Can I use equity from my primary residence to buy an investment property?
Yes, many homeowners use equity to purchase rental properties or vacation homes, provided they meet lending criteria.
Will I need to qualify for two mortgages at once?
If you’re keeping both homes temporarily, lenders will assess your ability to carry both mortgage payments, which may require higher income and lower debt levels.
What credit score is needed to access home equity?
Most lenders prefer a score of 620 or higher, but scores above 700 typically qualify for better rates and terms.
Will using equity affect my credit score?
Opening a new loan or line of credit may cause a temporary dip in your score, but responsible repayment can improve it over time.
What are the risks of buying before selling?
You may face financial strain from carrying two mortgages, market fluctuations, or delays in selling your current home.
Is it harder to qualify for equity financing if I’m self-employed?
Self-employed borrowers may face stricter documentation requirements, but can still qualify with strong income records and credit.
Can I use equity to buy a home in another state?
Yes, equity from your current home can be used to purchase property anywhere in the US, like WA, CA, CO, ID, and ID, as long as you meet lender guidelines.
Should I talk to a mortgage lender before making a move?
Yes, a mortgage lender like Sammamish Mortgage can help you compare options, understand costs, and find the best strategy for using equity to buy your next home without selling first.
Using equity to buy your next home without selling first is a powerful strategy that gives homeowners more control over their real estate transactions. By leveraging the value in your current property, you can secure your next home on your terms, without the stress of rushed sales or temporary housing.
Are you ready to apply for a mortgage? If so, Sammamish Mortgage can help. We are a mortgage company providing mortgage programs to borrowers throughout Washington, Oregon, Idaho, Colorado, and California since 1992. Contact us today with any questions you have about mortgages, or visit our website to get an instant rate quote.
Whether you’re buying a home or ready to refinance, our professionals can help.
{hours_open} - {hours_closed} Pacific
No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.
Adjust the parameters based on what you want to track