The Benefits of Leveraging Your Home Equity for a Bigger Down Payment

Are you aware that homeowners can significantly boost their down payment when purchasing a new home? When you sell your current property, the equity you've built can be used towards your next down payment. As home equity reaches new heights, the median down payment has also increased.

According to recent data from Redfin, the typical down payment for U.S. homebuyers is now $67,500—a nearly 15% increase from last year and the highest recorded amount.

Why Rising Home Equity Matters

Over the past five years, rising home prices have led to a substantial increase in equity for homeowners. When you sell your home, you can apply this equity toward a larger down payment on your next property, a key opportunity for those concerned about affordability.

While it’s possible to buy a home with as little as 3% or even 0% down, many homeowners are choosing to make larger down payments for several compelling reasons:

1. Borrow Less and Save More

Using your equity for a bigger down payment means borrowing less. The less you borrow, the less interest you’ll pay over the life of your loan, resulting in long-term savings.

2. Potential for a Lower Mortgage Rate

A larger down payment demonstrates financial stability to lenders. This can lead to a lower mortgage rate, further amplifying your savings.

3. Reduced Monthly Payments

A larger down payment not only reduces your loan amount but also lowers your monthly mortgage payments, making your next home more affordable.

4. Eliminate Private Mortgage Insurance (PMI)

If you can make a down payment of 20% or more, you can avoid Private Mortgage Insurance (PMI), which protects lenders in case of default. Skipping PMI means one less monthly expense.

Conclusion

With down payments at record highs, recent equity gains are empowering homeowners to make larger contributions when buying a new home. If you’re considering using your equity for your next purchase, let’s connect to explore your options!