Upgrader / Upsizer Guide
Upgrading to a larger home means managing two transactions: selling your current property and buying the next one. Done well, you can use your existing equity to reduce your new loan and reach a lower LVR. Done poorly, timing mismatches can leave you carrying two loans or selling under pressure.
By Better Rate Mate Editorial Team · Last reviewed
1Key financial priorities
Calculate your usable equity
Equity is your home's value minus what you owe. Borrowing more than 80% of a property's value generally means paying lenders mortgage insurance, so 80% of the value minus your current loan is a useful guide to the equity you can draw on without LMI. Get a bank valuation before you set your budget, because it may differ from your own estimate.
Decide: sell first or buy first
Selling first gives you certainty over your budget but may mean renting in between. Buying first secures your next home but can mean holding two loans until your sale settles, so plan how you'll cover both.
Understand bridging finance
A bridging loan covers the gap between buying your new home and receiving the proceeds of your sale. CommBank, for example, offers bridging loans with a maximum term of 12 months, during which you can make interest-only payments; the sale proceeds then pay off the bridging loan. Budget for interest on both debts while you hold two properties.
Restructure your loan
Upgrading is a good time to review the whole loan. Lenders price in LVR bands, so more equity can move you into a cheaper band. Compare lenders rather than simply topping up your existing loan.
2Loan types to consider at this stage
Bridging loan
If you buy before you sellCovers the peak debt between buying and selling. Keep the bridging period short: you pay interest on both debts until the sale settles.
Variable rate with offset
For sale proceeds and savingsParking money in an offset account reduces the interest you pay while keeping it available. See offset accounts.
Fixed rate split
For repayment certaintyIf your loan is getting much bigger, fixing part of it gives you predictable repayments while you adjust.
3Insurance needs at this stage
- ✓Update building and contents insurance to reflect the new property's value
- ✓Review life and income protection cover, since your loan has probably grown
- ✓Consider landlord insurance if you rent out your old home before it sells
4Common mistakes to avoid
- ✗Underestimating bridging costs if the sale takes longer than planned
- ✗Setting an asking price too high, which drags out the sale and adds interest
- ✗Not getting a bank valuation before committing to a purchase price
- ✗Topping up your existing loan without comparing other lenders
- ✗Not budgeting for two lots of conveyancing, agent's commission and moving costs
5Tips for getting a better rate
- 1Ask lenders what rate applies at your new LVR: more equity can move you into a cheaper pricing band
- 2Ask your current lender to match the best offer before you switch
- 3A mortgage broker can compare loans from the lenders it works with; Moneysmart suggests asking which lenders those are and how the broker is paid
- 4Weigh a cashback offer against any rate difference over the time you'll keep the loan
Common questions
What is a bridging loan?
A short-term loan that lets you buy your next home before you sell your current one. At CommBank, for example, it lasts up to 12 months, you can pay interest only during that time, and the sale proceeds pay it off.
Should I sell first or buy first?
Selling first fixes your budget but may mean renting in between; buying first secures the next home but means carrying two debts until the sale settles. The right order depends on how long a sale might take and whether you could cover both loans in the meantime.
How much equity can I use to upgrade?
As a guide, 80% of your home's value minus what you owe, because borrowing above 80% of a property's value usually means paying lenders mortgage insurance. The lender's valuation decides the figure.
