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4 Ways Your Current Home Equity Can Help You Get a New Home

Posted on Mar 23, 2017 by Earl Raatz

ways-your-current-home-equity-can-help-you-get-new-home-blue-houses-featured-image.pngIf you can't seem to shake the image of a brand-new home from your mind, there's probably a deeper reason. Maybe you've just grown tired of the design or the layout of your current house and crave something more. If you’ve been dreaming of owning a new home but feel you could never make the necessary down payment for one, it's possible you have more resources and options available than you realize.

It turns out that all the time you’ve spent in your old house, paying your mortgage bills promptly each month, can reap you some major rewards in the present. The equity you've built up in the house you have now can be applied toward the purchase of your dream home using one of several methods.

It's not necessary to sell your current home beforehand to raise the cash for a deposit either; your accumulated equity can set things in motion by itself. It can also save you the waste of rushing to sell your present house at the cheapest price and having to rent a place to live in temporarily once you've sold it.

You can land the home of your dreams faster and easier than you ever thought possible by means of the home equity options listed below.


A HELOC (home equity line of credit) is basically a credit line that's secured with the equity you have in your current home. The whole process is a lot like obtaining an extra mortgage on your property.

If you were able to get your present house at a great rate, and you’ve since paid off a substantial chunk of your mortgage, your house's value is higher than what you've already paid on it. A loan provider can use your existing home's equity to obtain financing for you, and how much you'll be offered will depend on the mortgage you still owe compared to your house's total value.

Although HELOCs are most commonly used to consolidate debts or perform upgrades on people's present homes, they can be used for just about anything–including as investments on a new home! Your lender will assist you in determining whether you should obtain a HELOC to use as a down payment on a brand-new property.

ways-your-current-home-equity-can-help-you-get-new-home-consultation.png2. Bridge Loans

Just as "bridge" is a term for a link that connects one point to another, bridge loans can help bring you from your present state of unfulfillment with your current house to the point of having your ideal home constructed. A bridge loan is basically a temporary loan, with distinct conditions and premiums, that covers the difference between what you make from selling your current house and the price of a new residence.

If you already have a mortgage, this could be the perfect fix for your lack of funds. It will provide you with the money needed to start constructing your new home without scrambling to close on your current house first. It’s an option that gives you exactly what you're after as quickly as possible, and a solution that plenty of Canadian home buyers have taken advantage of.

3. Total Mortgage Refinances

A total mortgage refinance involves cashing out equity by cancelling the mortgage on your current house. If it's time for your mortgage to be renewed, or if canceling it does not result in a penalty fee, you might want to look into getting a full refinance.

However, even if it does result in a penalty, a refinance can provide you with a chance to consolidate unsecured debts and get lower interest rates from your loan provider. Depending on the penalty, it may be worth the cost if your new mortgage interest rate is lower, saving you money over time.

Remember, though, there's a difference in terms of flexibility between open and closed mortgages. Your ability to refinance will depend on the type of mortgage you currently have.

4. Portable Mortgages

You might determine that selling your current house before having your new home built is your best option. In this case, you may still be able to "port" your existing mortgage, which could save you a huge amount of money that you can then use to customize your brand new home.

Interest costs may rise any time you obtain a new mortgage, and you may have to pay a fee to cancel your present mortgage agreement. However, it's quite possible that the mortgage you have now contains a term of portability, which enables you to roll it over onto a new property without paying a penalty to cancel your agreement and get another mortgage.

Regardless of what current interest rates are compared to those of your existing mortgage, you'll at least be able to avoid paying any cancellation fees by using this method to fund a deposit on a new home.

Whether you choose to sell your current property before having a new one constructed or not, you can now see that there are a number of options to effectively use your built-up home equity for your initial deposit.

You don't have to wait any longer to get the ball rolling on your new home build just because you can't cover that intimidating down payment in cash. Calculate your next home purchase, then consider which one of the methods listed above might work for you and get started!

You want your home buying process to run smoothly, and being well-informed about mortgages can help make that happen. Read about 5 Mortgage Mistakes And How To Avoid Them, before learning the hard way!

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Photo credits: blue houses, consultation

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