Should I Use My Home Equity to Buy My Next Long Island Home?

If you’ve owned your Long Island home for several years, chances are you’ve built up significant equity — especially with recent appreciation in many neighborhoods. That equity can be a powerful tool when it’s time to buy your next home. But should you actually tap into it? Here’s what to consider before using your home equity to fund your next purchase.

What Is Home Equity?

Your home equity is the difference between your property’s current market value and the balance on your mortgage. For example, if your home is worth $750,000 and you owe $400,000, your equity is $350,000.

This equity can be accessed in a few different ways to help you purchase your next home.

Option 1: Home Equity Loan

A home equity loan is a lump-sum loan using your current home as collateral. You repay it over a fixed period, similar to a second mortgage.

Pros:

• Predictable payments with fixed interest rates

• Ideal for planned, one-time expenses like a down payment

Cons:

• You must start repayment immediately

• You’re taking on a second mortgage while still owning your first home

Option 2: Home Equity Line of Credit (HELOC)

A HELOC works like a credit card — you can borrow as needed up to a certain limit. It’s flexible and can be useful if you’re unsure how much you’ll need.

Pros:

• Borrow only what you need when you need it

• Often has lower interest rates than personal loans

Cons:

• Variable interest rates can increase over time

• Must be set up before listing your home (most lenders won’t approve once your home is for sale)

Eric Berman REALTOR helps clients coordinate the timing of HELOCs with their sale to ensure they don’t miss critical financing windows.

Option 3: Cash-Out Refinance

A cash-out refinance replaces your current mortgage with a new, larger one. The difference between the two loan amounts is paid out to you in cash.

Pros:

• Simplifies your finances into one mortgage

• May offer lower rates than home equity loans

Cons:

• Extends your repayment timeline

• Can reduce your total equity in the home

This can be a smart strategy for Long Island homeowners who plan to sell within a year and want liquidity without juggling multiple loans.

Option 4: Sell First and Use Proceeds

If you’re not comfortable carrying two loans at once, selling your current home first and using the proceeds is often the safest path. You can then negotiate a rent-back agreement or extended closing to give yourself time to close on your next property.

Eric often structures sales this way for clients who prefer a lower-risk transition.

Key Considerations Before Using Equity

• Market Conditions: Long Island’s housing market shifts by season and town — selling first may be better if inventory is tight.

• Interest Rates: Compare rates for HELOCs, home equity loans, and refinances before deciding.

• Financial Cushion: Keep enough cash reserves to handle moving expenses and emergencies.

Eric Berman REALTOR can connect you with trusted lenders who specialize in financing transitions for homeowners moving within or beyond Long Island.

FAQs

1. What’s the best way to use my home equity when upgrading homes?
The ideal strategy depends on your goals and timing. For tailored advice, contact Eric Berman REALTOR to explore your financing options.

2. Can I get a HELOC after listing my home?
Most lenders won’t approve a HELOC once your home is on the market. Reach out to Eric Berman REALTOR before listing to plan ahead.

3. Is a cash-out refinance better than a home equity loan?
It depends on interest rates and your long-term plans. Eric can help you compare both options — contact him here for a breakdown.

4. What are the risks of using home equity to buy another home?
Carrying multiple loans increases your debt and limits flexibility. Talk with Eric Berman REALTOR about strategies to minimize financial stress.

5. How much equity do I need to use it for my next home?
Most lenders require you to keep at least 15–20% equity after borrowing. For help calculating your available equity, get in touch with Eric Berman REALTOR.