Can I count my current home’s equity?

Short answer: yes. For most move-up buyers, the equity in the current home — not the paycheck — is what makes the next home possible. But “equity” and “cash you can actually spend” are different numbers, and the gap between them surprises people. Here’s how to count it right.

From equity to spendable cash

Your equity is today’s market value minus what you still owe. What you can put toward the next home is your net proceeds:

• Start with a realistic sale price — not the neighbor’s wishful listing.
• Subtract your mortgage payoff (ask your servicer — it differs slightly from the statement balance).
• Subtract selling costs: agent commissions, closing fees, transfer taxes, and prep — typically 8–10% of the sale price all-in.

What’s left is real down-payment money. On a $500k home with $250k owed, $250k of “equity” becomes roughly $200k of spendable proceeds.

Why it moves your number so much

Your Buying Power is capped by two ceilings — monthly budget and cash — and for move-up buyers the cash ceiling usually binds first. Adding six figures of proceeds raises that ceiling directly: it’s how the same income that bought your current home can reach a much more expensive next one. A bigger down payment can also mean a smaller loan, no PMI, and a stronger offer.

Sell first, or buy first?

Selling first turns equity into cash in hand: your budget is exact, your offer has no strings, and you qualify without carrying two mortgages. The cost is the in-between — you may need temporary housing or a rent-back agreement from your buyer.

Buying first means you move once and never miss the right house — but your offer either carries a home-sale contingency (the weakest kind in a competitive market) or you bridge the gap with financing, and you must qualify while still owning the old home.

The bridging tools

• HELOC — open it before you list (lenders won’t open one on a home for sale). Cheapest option, flexible, but it’s another payment you must qualify with.
• Bridge loan — borrows against your current home, usually up to ~80% of its value, for 6–12 months. Fast and contingency-free, but rates are higher and most lenders want at least 20% equity — and if your old home doesn’t sell, you’re carrying everything.
• Buy-before-you-sell programs — a company fronts the new purchase and you repay from the sale; convenient, priced accordingly.

Whichever path: get your payoff quote, use a sober value estimate, and check whether you’d qualify carrying both payments — that answer often makes the sell-first / buy-first decision for you.