If you’re thinking about buying your next home, you’ve probably heard the traditional advice: save 20% for your down payment.
But here’s the thing—you don’t necessarily need 20% down to buy a home. There are several loan options that allow qualified buyers to put down considerably less.
So why are so many repeat buyers still choosing to put 20% or more down?
For many, it comes down to two things: equity and long-term savings.
Repeat Buyers Are Putting More Down
According to the National Association of REALTORS®, the typical repeat buyer puts down 23% when purchasing a home. That’s significantly more than the 10% median down payment for first-time buyers.
How are repeat buyers able to put so much down?
In many cases, the answer is home equity.
After owning a home for several years, you may have built equity in two ways. You’ve likely paid down a portion of your mortgage, while your home may also have increased in value over time.
Your equity is the difference between what your home is worth and what you still owe on your mortgage. When you sell, that equity can become an important source of funds for your next home purchase.
For many repeat buyers, that means the home they’re selling can help fund the home they’re buying.
First-time buyers don’t have that advantage yet, and that’s completely normal. But if you already own a home, you may have more purchasing power than you realize.
4 Benefits of Putting 20% or More Down
If your equity makes a larger down payment possible, it may be worth considering. Here are a few potential benefits:
1. A Lower Monthly Payment
The more you put down, the less you need to borrow. A smaller mortgage balance can mean a lower monthly payment, which may make your next move more manageable.
2. Less Interest Over Time
Borrowing less also means paying interest on a smaller loan balance. Over the life of your mortgage, that can add up to significant savings.
3. Avoiding PMI
With a conventional mortgage, putting less than 20% down typically means paying private mortgage insurance (PMI). Putting 20% down can help you avoid that additional monthly cost, depending on your loan program and lender.
4. A Potentially Stronger Offer
A larger down payment can also make your offer more appealing to sellers. It may signal that you have stronger financing and could reduce some of the perceived risk of the transaction.
Is 20% Down Right for You?
There’s no one-size-fits-all answer when it comes to your down payment.
Putting 20% down isn’t required for many buyers, and it may not always be the best financial choice. You’ll want to consider your savings, monthly budget, interest rate, other financial goals, and how much equity you have available.
But if you’ve owned your current home for several years, your equity could make a larger down payment more attainable than it was the first time you bought.
A trusted lender can help you compare different down payment options and see how they would affect your monthly payment and overall costs.
And if you’re wondering how much equity you could put toward your next home, the Benson & Mangold team can help you take the first step.
