If you're planning to buy your next home, you've probably heard the long-standing advice to put 20% down.
The truth is, you don't have to.
Many loan programs allow qualified buyers to purchase a home with much less. But despite having more financing options available, many repeat homeowners still choose to make a 20% down payment—or even more.
Why?
Because after years of building equity, they finally have the opportunity to reduce their long-term housing costs and strengthen their buying position.
Home Equity Makes a Larger Down Payment Possible
According to the National Association of Realtors, the typical repeat homebuyer puts down approximately 23% when purchasing their next home.
That's more than double what many first-time buyers contribute.
The reason is simple: equity.
As you own your home over time, two things typically happen:
- Your mortgage balance decreases as you make payments.
- Your home's value appreciates as the market grows.
The difference between your home's current value and what you still owe is your home equity.
When you sell, that equity becomes available to help fund your next purchase.
For many homeowners, years of appreciation combined with mortgage payments create enough equity to comfortably make a larger down payment on their next home without significantly impacting their savings.
Four Benefits of Putting 20% Down
While a 20% down payment isn't required, it can offer meaningful financial advantages.
According to Redfin, buyers who make a larger down payment often benefit in several ways.
Lower Monthly Mortgage Payments
The more money you put down, the less you need to borrow.
A smaller loan typically translates into a lower monthly mortgage payment, making homeownership more affordable over the long term.
Less Interest Paid Over Time
Because you're financing a smaller loan amount, you'll pay interest on less money throughout the life of your mortgage.
That can add up to substantial savings over the years.
No Private Mortgage Insurance (PMI)
For conventional loans, buyers who put down less than 20% are generally required to pay Private Mortgage Insurance (PMI).
Reaching the 20% threshold usually eliminates that monthly expense, reducing your overall housing costs from day one.
A More Competitive Purchase Offer
In today's market, sellers often view larger down payments as a sign of stronger financing.
That can make your offer more attractive and provide greater confidence that the transaction will close successfully—especially in competitive situations.
Every Buyer's Situation Is Different
While putting 20% down offers significant advantages, it isn't the right choice for everyone.
Some buyers prefer to keep more cash available for home improvements, emergency savings, investments, or other financial goals.
Others may choose a smaller down payment to purchase sooner rather than waiting years to save additional funds.
That's why it's important to evaluate your entire financial picture—not just the size of your down payment.
A trusted lender can help you compare financing options, while a knowledgeable real estate agent can estimate how much equity your current home could contribute toward your next purchase.
Bottom Line
You don't need a 20% down payment to buy your next home—but if your equity makes it possible, it may be worth considering.
A larger down payment can lower your monthly payments, reduce the amount of interest you pay, eliminate PMI, and even strengthen your offer when competing for your next home.
✨ Curious how much buying power your current home could give you?
👉 Connect with a trusted local expert at https://aceestate.com/ and let's explore your equity, financing options, and the smartest path toward your next move.
