How Equity in Your Home Helps You Buy Your Next One

Short answer: When you sell, your equity (sale price minus mortgage minus selling costs) becomes your down payment on the next home. Example: sell for $550,000, owe $320,000, pay about $25,000 in selling costs, and you have about $205,000, enough for 20% down on a home up to about $1,025,000. If you buy before you sell, bridge financing, a HELOC or a refinance can free it up early.

What Is Home Equity?

The difference between your home’s market value and what you owe. It grows as you pay down the mortgage and as your home appreciates.

How Equity Buys Your Next Home

When you sell, the net proceeds become your down payment, plus a cushion for closing and moving costs.

Example:

• Sale price: $550,000
• Mortgage balance: $320,000
• Selling costs: about $25,000
• Net proceeds: about $205,000

Work Out Your Net Equity

1. Estimate a realistic value from recent comparable sales or a REALTOR® opinion
2. Subtract your mortgage balance
3. Subtract selling costs, usually 5% to 7%

Buying Before You Sell

You may not have your equity yet, so you either qualify for two mortgages or use bridge financing once your sale is firm.

→ Read more: Bridge Financing in Canada

How Lenders View Your Equity

• Already sold: simple. Your net proceeds are your down payment.
• Listed, not sold: the lender may require you to qualify carrying both mortgages.
• Not listed yet: hardest. You’ll likely qualify for both on income alone.

Using Equity Without Selling

A HELOC allows borrowing up to 65% of value, a refinance up to 80%, but you still need to qualify. It’s more common for renovations or investing than for a move.

How Much Equity Do You Need?

Minimum down payment is 5% on the first $500,000 and 10% on the rest up to $1,500,000, and 20% above that. Budget closing costs on both the sale and purchase, and keep an emergency fund. Many move up buyers aim for 20% down to avoid mortgage insurance.

Mistakes to Avoid

• Overestimating your home’s value
• Forgetting selling costs
• Spending equity before you move
• Assuming equity is cash before you sell

How We Help

We calculate your realistic net proceeds, your buying power, and whether bridge financing fits, and coordinate timing with your REALTOR®. Book a call.

Frequently asked questions

How do I calculate my net equity before selling?

Take your home's realistic market value, subtract your mortgage balance, then subtract selling costs of about 5% to 7% (commission, legal, adjustments). What's left is your net equity for the next down payment.

Can I use my equity before I sell?

Yes, through bridge financing once your sale is firm, or through a HELOC (up to 65% of value) or refinance (up to 80%) while you still own the home, if you qualify.

This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed and powered by Mortgage Connection Inc.