What Counts as Usable Equity
Usable equity is generally the difference between your home's current value and what you owe, minus a buffer most lenders require you to keep. It is not the same as your full equity on paper. A mortgage broker can help calculate a realistic number based on current lending guidelines and your specific property.
Refinancing Before You List
Some homeowners refinance to pull out equity before selling, using the funds for a down payment deposit or renovations on the current home to boost its sale price. This only makes sense if your timeline and penalty costs work out, so run the numbers with a broker first.
Home Equity Line of Credit Option
A HELOC gives you flexible access to equity without a lump sum payout, which can be useful if you need funds for a deposit before your home sale closes. Interest is only charged on what you draw, making it a lower cost option compared to some other short term borrowing.
- Flexible draw amounts
- Interest only on funds used
- Requires sufficient equity
Blending Old and New Mortgage Terms
If you are increasing your mortgage amount rather than starting fresh, some lenders offer a blend and extend option that combines your existing rate with a new rate on the additional funds. This can be cheaper than breaking your mortgage entirely, depending on your current terms.
Planning for Closing Costs on Both Ends
Remember that moving up involves land transfer tax, legal fees, and moving costs on top of the price difference between homes. Build a full budget rather than focusing only on the down payment gap, so you are not caught short at closing.
Frequently asked questions
- How do I find out how much equity I can access?
- A mortgage broker can review your current mortgage balance, an estimated home value, and current lending limits to give you a realistic number.
- Is a HELOC or a refinance better for accessing equity?
- It depends on your goals, a HELOC offers flexibility while a refinance gives a lump sum, often at a different rate structure, so compare both with a broker.
- Do I need good credit to access home equity?
- Lenders do consider credit history for equity products, though the home itself serves as security, which can help even if your credit is not perfect.