Unlocking the Power of Home Equity: How It Can Boost Your Next Down Payment

Did you know that homeowners often have the advantage of making a more substantial down payment when purchasing their next home? This is largely because they can tap into the equity built up in their current property. As home equity continues to soar to new heights, we’re also seeing a rise in the median down payment.

According to Redfin, the typical down payment for U.S. homebuyers has reached a record $67,500, marking nearly a 15% increase from last year. This opportunity is largely driven by the significant rise in home prices over the past five years, which has substantially boosted equity for homeowners like you. When you decide to sell and move, this equity can be a game changer, enabling a larger down payment on your new home—a major advantage if affordability has been a concern.

Benefits of a Bigger Down Payment

1. Borrow Less and Save MoreUtilizing your home equity for a larger down payment means you’ll need to borrow less. Consequently, borrowing less reduces the amount of interest paid over the life of the loan, putting significant savings back into your pocket.
2. Secure a Lower Mortgage RateA larger down payment may present you as a lower credit risk to lenders, potentially resulting in a lower mortgage rate. This can significantly amplify your savings over time.
3. Reduce Monthly PaymentsA bigger down payment doesn’t just decrease the total amount you’ll need to borrow; it can also lead to lower monthly mortgage payments. This increased affordability provides more flexibility and breathing room in your budget.
4. Avoid Private Mortgage Insurance (PMI)Putting down 20% or more allows you to skip Private Mortgage Insurance (PMI). PMI is an additional cost that protects the lender if you’re unable to pay your mortgage, and it typically applies if your down payment is less than 20%. Avoiding PMI means one less monthly expense, which can ease your financial load.

The Bottom Line

The surge in home equity gains presents a fantastic opportunity for homeowners to enhance their buying power in today’s market. If you’re contemplating selling your current home and moving, now is a great time to assess how much home equity you have and how it can be leveraged for a more substantial down payment.

Let’s connect to evaluate your home equity and explore how it can bolster your options and position in the housing market. This strategic move could be the key to unlocking your dream home with confidence and financial savvy.