If you’re thinking about buying your next home, you may be wondering how much you should put down.
While a 20% down payment isn’t required for many mortgage programs, putting more money down can have some meaningful advantages — especially if you’re selling a home and have equity available to help fund your next purchase.
Your Home Equity Could Give You More Buying Power
If you’ve owned your current home for several years, there’s a good chance you’ve built equity through a combination of paying down your mortgage and changes in your home’s value.
When you sell, that equity may become one of your biggest financial resources for purchasing your next property.
That’s one reason repeat buyers often make larger down payments. Instead of starting from scratch, they may be able to use proceeds from their current home toward their next purchase.
Before assuming your next move is out of reach, it’s worth finding out how much equity you actually have.
Why Consider Putting 20% Down?
If you have the financial flexibility, a larger down payment can offer several benefits.
1. Lower Monthly Mortgage Payments
The more money you put down upfront, the less you need to borrow.
A smaller mortgage generally means a lower monthly principal-and-interest payment, which can make your new home more manageable within your monthly budget.
2. Less Interest Over Time
Borrowing less can also mean paying less interest over the life of your loan.
That difference can become significant over a 15- or 30-year mortgage, particularly when mortgage rates are elevated.
3. You May Avoid Private Mortgage Insurance
With many conventional mortgages, putting less than 20% down typically means paying private mortgage insurance, or PMI.
Reaching the 20% threshold can eliminate that additional monthly expense from the start.
4. Your Offer May Look Stronger
A larger down payment may also strengthen your position when making an offer.
While price and terms still matter, sellers may view buyers with larger down payments as financially prepared and potentially less likely to encounter financing problems before closing.
But 20% Isn’t Always the Best Choice
Putting 20% down has advantages, but that doesn’t automatically make it the right financial decision for every buyer.
Using too much of your available cash for a down payment could leave you with limited reserves for closing costs, repairs, renovations, emergencies, moving expenses, or other financial priorities.
The goal shouldn’t simply be to hit a certain percentage. It should be to find the financing structure that works best for your overall financial situation.
The Bottom Line
You don’t necessarily need a 20% down payment to buy a home.
But if you already own a property and have built substantial equity, putting 20% or more down could help lower your monthly payment, reduce your long-term interest costs, potentially eliminate PMI, and strengthen your offer.
Wondering how much equity you have — and what it could mean for your next move?
Let’s look at your current home’s value and explore what your options could look like in today’s market.
Tim Fiebig
DRE #00657474
510-708-8700
eXp Realty of California