Upgrading your current home: how the money works
From Aaron’s TikTok: “Upgrade Your Current Home”
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Posted 20 March 2025
The short version
- The deposit for your next home is usually already sitting in your current one, as usable equity.
- Usable equity is your home’s value minus what the bank requires you to keep in it, not just value minus loan.
- Sell-first is simpler; buy-first needs bridging finance and a stronger position. Both are workable with a plan.
- Keeping your first home as a rental instead of selling can be possible, but the servicing maths decides it.
Your deposit is hiding in your current house
If your home is worth $850,000 and your loan is $450,000, you do not get to use all $400,000 of that difference. The bank generally wants a buffer of the home’s value left in the property, and what remains after that buffer is your usable equity: the deposit for the next purchase.
That number is often bigger than people expect, especially if you have owned for a few years of rising values and a shrinking loan. Most upgraders do not need to have saved a second cash deposit at all.
Sell first, or buy first?
Selling first is the low-stress route: you know exactly what you have, and you negotiate on the next place as a cash-ready buyer. The cost is that you may need somewhere to live in between.
Buying first means you never move twice, but you briefly own two properties, which usually needs bridging finance and enough income to satisfy the bank across both loans for that window. Banks have appetite for it when the numbers work; the key is arranging it before you offer, not after.
Or keep the first home and rent it out
Sometimes the better move is not selling at all: restructure the lending, keep your first home as a rental, and use the equity to buy the next family home. Rental income helps the application, but investor lending rules mean more equity is required against the rental, and the whole picture has to service at the bank’s test rates.
This is a genuinely personal calculation: tax, cashflow, risk appetite, and what the two loans look like together. Fifteen minutes with an adviser tells you whether it is realistic for you.
This is general information, not personalised financial advice. For advice on your situation, talk to Aaron.
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