Leveraging Home Equity: How Move-Up Buyers in Minnesota Can Unlock Their Next Home

Buying your next home can be both an exciting and overwhelming experience, especially if you’re counting on the equity from your current house to help make it happen. Leveraging home equity means using the value built up in your existing property—through appreciation or paying down your mortgage—to help purchase your next home. In this article, we’ll explain how equity works, outline your options for accessing it, and offer practical tips for Twin Cities-area move-up buyers considering their next step.

Quick Answers: Leveraging Equity for Your Next Home

• How do I access equity if my current home hasn’t sold? You may use a bridge loan or HELOC, depending on your finances and lender guidelines.
• What if I need funds for a down payment before selling? Bridge loans and some HELOCs allow you to tap equity before your home is sold.
• Do I need a lot of equity to move up? Generally, more equity improves your options, but some solutions work with moderate equity—consult a lender for your scenario.
• Will using equity affect my ability to qualify for a new mortgage? Yes, borrowing against equity may impact your debt-to-income ratio, so underwriting will consider both payments temporarily.
• Which option is best—bridge, HELOC, or cash-out after sale? It depends on your timeline, equity, credit profile, and how competitive your local market is.

Understanding Home Equity for Move-Up Buyers

Home equity is the difference between your home’s current market value and your remaining mortgage balance. For many Twin Cities homeowners, equity has grown thanks to rising property values in areas like Eagan, Woodbury, and Maple Grove. Move-up buyers often rely on this built-up equity as part (or all) of their down payment and closing costs on their next home.

The team at American Dream Home Team (NMLS# 175656) specializes in helping buyers across Minneapolis, Saint Paul, and surrounding communities unlock this potential.

Ways to Access Your Home Equity Before Buying

When you’re ready to move, you have several practical options for utilizing your home’s equity:

1. Sell First, Buy Second (Traditional Approach)

• Sell your current home, pay off your mortgage, and use the proceeds for your next purchase.
• This eliminates risk of double payments but may mean you rent or stay with family while searching for your new home.
• Timing can be tough in fast-moving markets like Dakota County or Washington County.

2. Bridge Loan

• A short-term loan using your current home’s equity to fund your next home’s down payment.
• Bridge loans are paid off when your existing home sells.
• This option can be helpful if you find your new home before your current one sells.
• Often used by move-up buyers needing flexibility in tight inventory markets such as Edina, Minnetonka, and Rosemount.
• Learn more on our Bridge Home Loan page.

3. Home Equity Line of Credit (HELOC)

• Open a HELOC on your current home before listing to tap into available equity for your next down payment.
• HELOCs are revolving lines, so you withdraw only what you need and pay interest on just that amount.
• This is an option for those with strong equity, credit, and planning ahead of their move.
• Explore details on our HELOC Home Loan page.

4. Cross-Collateralization (Less Common)

• Some lenders offer solutions using both your current and future home as collateral for a new loan.
• This advanced strategy usually applies to borrowers with significant equity and complex situations, often requiring more documentation.

Which Option is Right for You?

The ideal method for leveraging your equity depends on timing, available savings, and risk tolerance:

• Sell first if you want a simpler transaction but can handle temporary housing.
• Bridge loan if you need to buy and sell simultaneously or want to write a non-contingent offer.
• HELOC if you can qualify while still living in your primary home and need flexibility with funds.
• Other creative solutions may work if you have unique property or income situations (such as investment buyers or self-employed borrowers—ask about our bank statement program).

Key Factors Lenders Consider

When you apply for a move-up purchase using equity from your current home, lenders will look at several factors:

• Equity available: The difference between your home’s loan balance and its current value, as determined by a recent appraisal or market analysis.
• Credit profile: Minimum required credit scores vary by loan type, but strong credit expands your options.
• Debt-to-income ratio: If you’re carrying both mortgages temporarily (before selling), lenders must consider both payments in your qualifying ratios.
• Documentation: Standard income, asset, and property documentation apply (for self-employed borrowers, alternative income documentation may be available).

These requirements and guidelines can change—always check with a lender to understand the most current details for your county and scenario.

How a Bridge Loan Works for Move-Up Buyers

Bridge loans are especially popular for move-up buyers needing to access equity quickly. Here’s how the process typically unfolds:

1. Determine your home’s equity through a market analysis or appraisal.
2. Apply for a bridge loan with a participating lender, providing necessary documentation.
3. Funds from the bridge loan are used as the down payment or closing costs on your next home, allowing you to purchase before your current home closes.
4. When your original home is sold, you use those sale proceeds to pay off the bridge loan in full (along with your old mortgage, if any).
5. Your long-term financing on the new home then continues as usual, typically as a fixed-rate or conventional mortgage.

Comparing Equity Access Options for Move-Up Buyers

Tips for Minnesota Move-Up Buyers Leveraging Equity

• Plan ahead: If considering a HELOC, open it before putting your current home on the market; lenders are usually unwilling once it’s listed for sale.
• Get pre-approved early: Knowing your purchase budget and how much equity you can use gives you negotiating power.
• Work with local experts: Real estate and lending teams familiar with the Twin Cities and suburbs can help time your transactions to minimize risks and temporary housing needs.
• Assess the market: If inventory is tight in places like Lakeville, Maple Grove, or Chisago City, non-contingent offers made possible by a bridge loan may help you stand out.

Frequently Asked Questions

This is educational and not financial advice. Loan programs and guidelines can change. Talk with a licensed mortgage professional about your specific scenario.

About the Author

Karli Spahr

Chief of Dream Fulfillment at American Dream Home Team · NMLS #253291

I’ve been doing mortgages for over 25 years and am passionate about helping others obtain The American Dream of homeownership. I have a Bachelor’s degree in Business and Economics and a Master’s Degree in Project Management.

Specializes in: FHA, VA, first-time buyer programs

Licensed in: FL, MN, WI

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