Top tips to upgrade your family home in Brighton East

Upgrading to a larger family home in Brighton East means working out how much you can borrow while you still own your current property.

Should you sell first or buy before settling?

You can purchase before selling if your borrowing capacity allows for both properties simultaneously. Lenders assess your ability to service both loans during the overlap period, which typically runs from exchange on the new property through to settlement of your existing home. Consider a buyer who owns a two-bedroom unit in Bentleigh valued at $750,000 with $400,000 remaining on the loan. If they want to purchase a four-bedroom house in Brighton East at the suburb's current median, the lender calculates serviceability on $400,000 plus the new loan amount until the Bentleigh property settles. This often requires a household income above $180,000 depending on other commitments. If your income doesn't support the overlap, you'll need to sell first and negotiate a longer settlement on your purchase, or arrange interim accommodation.

Using equity from your current home as a deposit

Equity is the difference between your property's current value and what you owe on it. That equity can be used as a deposit without needing to sell first, provided you meet serviceability requirements. A borrower with a property worth $850,000 and a loan balance of $500,000 has $350,000 in equity. Lenders typically allow you to access up to 80 per cent of the property's value minus the existing debt. In this scenario, 80 per cent of $850,000 is $680,000, leaving $180,000 available to use toward the next purchase after accounting for the existing $500,000 loan. You would still hold both properties during settlement, so your income must service both loans until you sell. Equity access works well when you're moving within the same area and can time both transactions closely, but it does lock you into completing both sales and purchases within a set window.

How split loans help manage rate risk during a property upgrade

A split loan structure divides your new borrowing between a fixed rate portion and a variable rate portion. This approach gives you stability on part of your repayments while keeping flexibility on the rest. Someone upgrading to a $1,400,000 home in Brighton East with a $1,000,000 loan might fix $600,000 for three years and leave $400,000 on a variable rate. The fixed portion holds your repayments steady even if rates rise, while the variable portion allows extra repayments without penalty and lets you redraw if settlement costs run over. Split rate structures are particularly useful during an upgrade because your cash flow is under pressure from overlapping settlements, moving costs, and often renovation work once you're in the new property.

What happens to your offset account when you refinance or upsize?

Your offset account balance reduces the interest charged on your loan by offsetting the loan balance for interest calculation purposes. When you refinance or increase your borrowing to upgrade, you can usually transfer your existing offset account to the new loan structure, but the benefit depends on how much you're borrowing. If you have $80,000 in an offset account linked to a $400,000 loan, you're offsetting 20 per cent of the balance. If you then borrow $1,000,000 to upgrade, that same $80,000 now offsets just 8 per cent of the loan. The dollar value of interest saved drops unless you rebuild the offset balance. Some buyers pull their offset funds out to use as part of the deposit for the upgrade, which makes sense if it helps you avoid Lenders Mortgage Insurance, but it does mean you lose the offset benefit entirely until you build savings again.

Structuring your loan to keep the investment portion separate

If you're keeping your current home as an investment property rather than selling, your loan structure needs to separate the investment debt from your new owner-occupied debt. Interest on an investment loan is tax deductible, but only if the borrowed funds are used to purchase or improve the investment property. Mixing investment and owner-occupied debt in the same loan account can limit your deductions. The approach that preserves your deductions is to refinance your existing property into a standalone investment loan before you purchase the new home, then take out a separate owner-occupied loan for the upgrade. You'll end up with two loans across two properties, but your investment loan remains fully deductible and your owner-occupied loan gives you access to an offset account to reduce interest without affecting the investment loan structure.

How serviceability is calculated when you're holding two properties

Lenders assess whether you can afford both loans at the same time, using your income, existing commitments, and a buffer rate that sits 3.0 percentage points above the actual loan rate. If you're applying for a variable rate loan at 6.2 per cent, the lender tests your ability to repay at 9.2 per cent. This buffer applies to both your existing loan and your new loan. In our experience, buyers who assume they can borrow based on the advertised rate often find their borrowing capacity is $150,000 to $200,000 lower than expected once the buffer and dual property holding period are factored in. Your income needs to comfortably service both loans at the buffered rate, plus any other debts like car loans or credit cards. If your current property will be sold before the new loan settles, some lenders allow you to exclude that loan from serviceability once you provide a signed contract of sale.

Loan features that matter when you're upgrading in Brighton East

Portability allows you to transfer your existing loan to a new property without refinancing, which can save on discharge and application fees. This feature works if you're selling and buying at the same time and your existing lender offers a competitive rate on the higher loan amount. An offset account linked to your new loan reduces the interest you pay while keeping your funds accessible for furniture, landscaping, or further renovation work. Redraw facilities on the variable portion of a split loan give you access to extra repayments if you need cash during the upgrade process. Fixed rate home loans offer repayment certainty, but most fixed loans limit extra repayments to $10,000 to $30,000 per year without penalty, and you generally can't redraw once extra repayments are made. Check these limits before you lock in a fixed rate, particularly if you expect to receive a windfall or bonus that you'd want to put toward the loan.

When to get pre-approval for your upgrade

Pre-approval confirms how much you can borrow and gives you confidence to make an offer before your current property sells. It's particularly useful in Brighton East, where homes close to St Joan of Arc Primary School, Were Street Village, and the Brighton East Tennis Club often attract multiple buyers and move quickly. Lenders assess your income, existing debts, and the equity in your current property, then issue conditional approval valid for three to six months. Pre-approval doesn't guarantee final loan approval, but it does mean the lender has verified your financial position and confirmed your borrowing capacity in principle. You'll still need a valuation on the property you're purchasing and formal contracts before the loan is finalised, but pre-approval lets you negotiate with agents and make offers knowing your budget is solid.

Call one of our team or book an appointment at a time that works for you to talk through your upgrade and get your borrowing capacity confirmed before you start looking.

Frequently Asked Questions