Smart ways to finance a bigger home in Deakin

Families in Deakin typically reach a point where the three-bedroom townhouse or apartment that worked perfectly well for a couple no longer fits the reality of school-aged children, home offices, and the need for separate living zones.

The challenge isn't just finding the right property in a suburb known for its proximity to Parliament House, Manuka cafes, and well-regarded schools. It's making the numbers work when you already have a mortgage, when interest rates have moved since you first borrowed, and when lenders assess your capacity differently than they did a few years ago.

Can you borrow more without selling first?

You can borrow more without selling your current home, but only if your income supports the total debt across both properties. Lenders assess your borrowing capacity using your gross income, existing debts including your current mortgage, and a serviceability buffer that adds 3.0 percentage points to the interest rate on any new loan. If your household income has increased since you first borrowed, or if you've paid down a meaningful portion of your existing mortgage, you may have enough capacity to fund a deposit and service a second loan temporarily while you prepare your current home for sale.

Consider a household earning $180,000 combined with a remaining mortgage balance of $520,000 on a property now valued at $750,000. If the existing loan sits at a variable rate and repayments are manageable, a lender will calculate how much additional debt that income can service after accounting for the existing mortgage, living expenses, and the 3.0 percentage point buffer. In many cases, there's enough capacity to fund a deposit from savings or equity and service both loans for the few months it takes to sell the original property. The key variable is the size of the new loan and whether the sale proceeds will clear the original debt and leave enough to reduce the new loan to a comfortable level.

How does equity in your current home affect your deposit?

Equity in your current home can be accessed to fund the deposit on your next property without needing to sell first. If your existing property has increased in value and your loan balance has reduced, the difference between the two represents usable equity. Lenders will typically allow you to borrow up to 80 per cent of the value of your current home without paying Lenders Mortgage Insurance. Anything above that figure triggers LMI, which can add several thousand dollars to your upfront costs.

In a scenario where your current home is valued at $750,000 and your remaining loan balance is $520,000, your equity position is $230,000. A lender will let you access a portion of that equity, usually up to 80 per cent of the property value, which in this case is $600,000. Subtract your existing $520,000 loan and you have $80,000 in accessible equity before LMI applies. That amount can be used as a deposit on the next property. Once your original home sells, the proceeds pay down the bridging debt and your loan structure resets to a single owner occupied home loan on the new property.

Should you fix, split, or stay variable when upgrading?

The loan structure you choose depends on your plans for the next 12 to 24 months and your tolerance for rate movement. If you're buying before selling and expect to make a large lump sum repayment once your current home settles, a variable rate gives you the flexibility to pay down the loan without break costs. If you want certainty over repayments during the transition period, a fixed rate locks in your repayments but limits your ability to make extra repayments without penalty. A split rate structure lets you fix a portion of the loan for stability and keep the remainder variable for flexibility.

We regularly see buyers in Deakin who upgrade using equity and a bridging loan structure, then repay a large portion of the debt once their original property sells. In those situations, keeping the loan variable or splitting it 50/50 between fixed and variable gives the flexibility to reduce the loan quickly without incurring break costs. Fixed rates work better for buyers who have already sold, have certainty over their loan amount, and want predictable repayments for the next few years. The choice comes down to timing and whether you're likely to make large repayments within the fixed rate period.

What loan features matter when you're holding two properties temporarily?

When you're holding two properties temporarily, loan features that reduce interest costs and provide flexibility become particularly valuable. An offset account linked to your new loan lets you park the sale proceeds from your first property and reduce the interest you're charged on the new loan from the day the funds hit the account. Portability lets you transfer your loan from one property to another without reapplying or paying discharge fees, though this feature is less commonly used in practice. Redraw facilities let you access extra repayments you've made, though offset accounts are generally more flexible because the funds remain in a separate transaction account.

Lenders also assess your loan application differently when you're holding two properties. Some lenders will take into account the expected sale price of your current home when calculating your borrowing capacity, while others will assess you on the assumption that you'll hold both properties indefinitely. The difference in approach can affect how much you're approved to borrow and which lenders are willing to support the transaction. This is where working with a broker who understands how each lender treats bridging scenarios makes a measurable difference to the outcome.

How do lenders treat rental income if you're keeping your current home?

If you're planning to keep your current home and rent it out rather than sell, lenders will include a portion of the rental income when assessing your borrowing capacity. Most lenders apply a shading factor, typically 80 per cent, to account for vacancy periods, maintenance costs, and the possibility that the property won't be tenanted year-round. So if your property in Deakin could rent for $700 per week, the lender will assess your income at $560 per week, or around $29,000 per year.

Rental income can improve your borrowing capacity, but it's rarely enough to fully offset the cost of holding an investment loan. Lenders also assess investment loans at a higher interest rate than owner-occupied loans for serviceability purposes, and you'll need to account for the tax implications of rental income and deductions when deciding whether to hold or sell. In most cases, families upgrading to a larger home in Deakin sell their original property rather than convert it to an investment, particularly if the equity from the sale meaningfully reduces the debt on the new home.

Does pre-approval give you an advantage when buying in Deakin?

Home loan pre-approval gives you a clear borrowing limit and signals to vendors and agents that you're a serious buyer with finance already assessed. In a suburb like Deakin, where most properties attract multiple interested parties and where buyers are often relocating for work or schooling, having pre-approval in place means you can make an offer with confidence and with fewer finance conditions.

Pre-approval is valid for three to six months depending on the lender and is conditional on your financial circumstances remaining unchanged. If you're buying before selling, the pre-approval will reflect the fact that you're temporarily holding two properties, and the lender will assess your capacity accordingly. If you're selling first, your pre-approval can be structured to reflect the sale proceeds and your final borrowing amount once the original property settles. The earlier you have the conversation with a broker, the more time you have to address any capacity constraints or structural issues before you start making offers.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, your equity position, and your borrowing capacity, and put together a loan structure that gets you into the next home without unnecessary cost or complexity.

Frequently Asked Questions