Learn how using your home equity for a larger down payment can provide financial benefits for your next property.

Did you know that homeowners can use the equity in their current home to make a bigger down payment on their next property? This is because, when they sell, they can apply the equity they’ve built toward their next down payment. With recent equity growth, the median down payment has also reached a new high, allowing buyers to secure better financing terms.

According to recent data from Redfin, the typical down payment for U.S. homebuyers is $67,500—an increase of 15% from last year and the highest on record.

How Equity Affects Your Down Payment

Over the past five years, home prices have risen significantly, leading to a substantial increase in equity for current homeowners. This presents a great opportunity, as you can use this accumulated equity to make a larger down payment on your new property, enhancing your buying power in today’s market.

It’s important to remember that you don’t need a large down payment to buy a home, as there are loan programs allowing as little as 3%, or even 0%. However, many homeowners choose to put more money down because of the benefits it offers.

Advantages of Making a Larger Down Payment

1. Less Debt and Long-Term Savings

By using your equity for a larger down payment, you’ll borrow less, meaning you’ll pay less interest over the life of the loan. This can result in significant savings over time and more money in your pocket.

2. Potential for a Lower Mortgage Rate

A larger down payment shows your lender that you’re financially stable and a low credit risk. This could result in a lower mortgage rate, which amplifies your savings over time.

3. Lower Monthly Payments

A bigger down payment reduces the amount you need to borrow, which can also lower your monthly mortgage payments, giving you more budget flexibility.

4. Avoid Private Mortgage Insurance (PMI)

If you can make a 20% down payment or more, you can avoid Private Mortgage Insurance (PMI). This means one less monthly expense to worry about. For more information, check out our guide on Florida's Down Payment Assistance Program.

If you’re considering selling your current home and moving, let’s work together to determine your current home equity and see how it can boost your buying power. Contact us for professional guidance.