Can I Move to a New Home with These Interest Rates?

If you’ve been thinking about moving but feel stuck because of rising mortgage rates, you’re definitely not alone. A lot of homeowners are hesitant to trade in their low-rate mortgage for something higher, even if their current home no longer fits their needs.

But before you give up and try to live in a home that's no longer the size, layout, or location you need, consider how your home equity might be the secret weapon that makes upgrading to a new place possible. You might be ready to look at homes for sale in St. George earlier than you thought. 

What is home equity?

Home equity is the difference between what your home is worth and what you still owe on your mortgage.

So, if your home is worth $500,000 and your mortgage balance is $250,000, you’ve got $250,000 in equity. It can be your most powerful asset in today’s real estate market.

To calculate your home equity, let's start with a free market analysis to find out what your home in St. George is currently worth. Then you can quickly calculate it with how much you still owe on your mortgage.

How can home equity help me afford a new home?

When you just look at the increased interest rates, it can be discouraging. Let's say you refinanced your home a few years ago and got a 3% interest rate, and now you're looking at more than double that. It may seem impossible to upgrade or even downsize, but the good news is that home values have been steadily rising the whole time. Savvy homeowners are using their equity to make a move work financially, even at higher rates.

Bigger Down Payment = Smaller Loan

Let's say that when you sell your current home, you walk away with $300,000 in equity. And then let's say you use $200,000 of that as a down payment on your next home. If you're buying a $500,000 home then that's only $300,000 financed. 

That smaller loan amount helps offset the sting of a higher interest rate. Your monthly mortgage payment will be lower than expected, even if your new rate is 6.5% compared to the 3% you had before. Make sure you're looking at actual mortgage calculators, not guesstimating based on calendars and headlines. 

Buying Down Your Rate

Another way equity can be leveraged is through buying down your interest rate. Lenders offer something called discount points, which allow you to “buy down” your mortgage rate. One point typically costs 1% of your loan amount and can reduce your rate by about 0.25%.

Let’s say you’re taking out a $350,000 mortgage and want to lower your rate. You can use a portion of your equity—say, $7,000—to buy two discount points and reduce your rate from 6.5% to 6%. Over time, that can save you thousands in interest and reduce your monthly payment.

Cover Closing Costs and Moving Expenses

Moving is an expensive transition. It's no secret that you'll have moving expenses and you may also be wondering if you can afford the closing costs. Using some of your equity to cover these one-time costs can make the transition much smoother and avoid dipping into savings or racking up credit card debt.

Bridge Loans and HELOCs

If you haven’t sold your current home yet, but want to buy before it goes on the market, some homeowners use a bridge loan or Home Equity Line of Credit (HELOC) to access their equity now.

This allows you to act quickly in a competitive market and use your existing equity as a stepping stone into your next home. If you think they might be helpful options, talk with a lender! We can connect you with trusted local pros if you need a suggestion. 

Erika Rogers offered her perspective: "Yes, mortgage rates are higher than they were a couple years ago. But that doesn’t mean you’re stuck. If you’ve built up equity, you’ve got options, real, powerful options."

Want to learn more about buying a home in St. George? We are here to help, so contact us any time.