If you’re planning to buy your next home in Greater Palm Springs, you’ve probably heard the traditional advice about saving 20% for a down payment.
The truth is, you usually don’t have to put 20% down. Plenty of loan programs allow qualified buyers to purchase a home with significantly less.
But there’s an interesting trend among homeowners who are buying again: many repeat buyers are choosing to put 20% or more down anyway.
Why put more money down if you don’t have to?
There are two big reasons. A larger down payment can provide meaningful financial advantages, and homeowners who have owned their property for several years may have enough equity to make that larger down payment possible.
Repeat Buyers Are Putting More Money Down
According to the National Association of Realtors (NAR), the typical repeat buyer puts down 23% when purchasing a home.
So, where is that additional money coming from?
For many homeowners, the answer is home equity.
When you own a home for several years, two things generally happen:
- You gradually pay down your mortgage balance.
- Your home's value may appreciate over time.
The difference between what your home is worth and what you still owe on your mortgage is your equity.
When you sell your current home, that equity can turn into cash. And according to NAR data, most repeat buyers put those proceeds directly toward the down payment on their next home.
But if you already own a home in Palm Springs, Rancho Mirage, Palm Desert, La Quinta, Indian Wells, Cathedral City, Indio, or another Coachella Valley community, you may have considerably more buying power than you realize.
And if your equity makes a 20% down payment possible, there are several reasons it's worth considering.
4 Benefits of Putting 20% or More Down
As Redfin explains, a larger down payment can provide several advantages.
1. A Smaller Monthly Mortgage Payment
The more money you put down, the less you need to borrow at today’s mortgage rates.
That can be especially important for homeowners who have been hesitant to move because they don't want to trade their existing low mortgage rate for a higher rate on their next home.
Using more of your equity toward the purchase could reduce the amount you finance and help make the monthly payment more manageable.
For buyers considering a move within Greater Palm Springs, this can be particularly useful when moving up to a larger home, relocating to a different Desert Cities community, or purchasing a property with more of the amenities you want.
2. Less Interest Over the Life of the Loan
A smaller mortgage can also mean paying less interest over the life of the loan.
If you put 20% down, you'll pay interest on the remaining 80% of the home's purchase price.
If you put 5% down, you'll be financing the remaining 95%, which can result in substantially more interest expense over the life of the mortgage.
That's why it’s important to look beyond the down payment itself and consider the long-term cost of financing.
3. No Private Mortgage Insurance (PMI)
Another potential advantage involves private mortgage insurance.
When you put less than 20% down on a conventional mortgage, lenders typically require private mortgage insurance (PMI).
PMI adds another expense to your monthly housing payment.
With a 20% down payment, PMI generally isn't required, which can reduce your monthly housing costs even further.
4. A Stronger Offer When You Find the Right Home
A larger down payment can also strengthen your offer.
Sellers may view a buyer with a substantial down payment as financially well-qualified, with a lower risk of financing issues preventing the transaction from closing.
That can be valuable when competing for desirable homes in Greater Palm Springs.
While today's market may offer buyers more choices than they had during the highly competitive pandemic-era market, certain properties, neighborhoods, golf communities, and price ranges can still attract significant buyer interest.
A strong financial position can help your offer stand out when the right property becomes available.
Your Greater Palm Springs Home Equity Could Make the Difference
This is where the conversation becomes particularly important for existing homeowners.
You may be thinking about moving but hesitating because today's mortgage rate is higher than the rate you currently have.
Instead of focusing solely on the difference in interest rates, it may be worth looking at your entire financial picture.
How much equity have you accumulated?
How much would you net if you sold your current home?
How much could you comfortably put toward your next purchase?
And what would your new monthly payment look like if you put 20%, 25%, 30%, or even more down?
For some Greater Palm Springs homeowners, accumulated equity could significantly reduce the amount they need to finance. Others, particularly longtime homeowners who are downsizing, may discover they have enough equity to purchase their next property with a very small mortgage or potentially without a mortgage at all.
The numbers will be different for every homeowner, which is why understanding your current home's value is an important first step.
Bottom Line
No, you don't need to put 20% down to buy your next home.
But if you're already a homeowner, you may want to consider it.
According to NAR, the typical repeat buyer is putting 23% down, and home equity is helping many of those buyers make larger down payments possible.
If your equity puts 20% or more within reach, a larger down payment could mean a smaller mortgage payment, less interest over time, no PMI on a conventional loan, and potentially a stronger offer when you find the right home.
A trusted lender can help you compare your financing options. And if you'd like to understand how much equity you have in your current Greater Palm Springs home, and how that equity could translate into buying power for your next move, let's connect and run the numbers.
