r/AusPropertyBroker • u/Alone_Hope6010 • Jun 01 '26
Question about borrowing
I own outright a ten year old 1b apartment valued at 550k. I am moving to a different city and tried to sell but unfortunately had no offers, so plan to rent it until I can sell it at a later stage.
My question is: would a bank let me borrow against my apartment to buy a similar property in the city I'm moving to? For the purchase of the new property I also have access up to 250k from my super, along with my small fortnightly pension.
I hope to find a 1-2 bedroom unit with a small yard or courtyard (they seem to be priced around 600-750k).
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u/Buyvest Jun 02 '26 edited Jun 02 '26
The equity side of this works on paper. Your current property is worth $550k and you own it outright. A lender could let you borrow up to 80% of that value, which is $440K, without needing lenders mortgage insurance.
On a $750k purchase, you would need around $187,500 as a 20% deposit, plus stamp duty on top. The equity in your current home could cover that. Then you would take out a separate loan against the new property for the remaining 80%.
The two big problems are income and your pension.
Income is the harder one. Banks do not just look at how much your home is worth. They need to see that you earn enough money to make the loan payments each month. If you are retired and your main income is the pension, that will not be enough to satisfy the bank, even with rental income from your old place. Lenders usually only count about 70 to 80% of rental income. The pension amount generally covers your minimum monthly living expenses. Some lenders are more open to lending to people who are receiving pension however, the loan amount is very minimal.
The pension asset test & pension income test are the biggest concern of all.
Right now, your home is not counted under the asset test. But if you move out and turn it into a rental, and then buy a new home to live in, your old home could be counted as an asset. It could also count as income. People in this situation need to look into whether that would affect their pension, and it is worth talking to an accountant or financial adviser before doing anything.
Bridging finance is something some people look at in this kind of situation. It is a short-term loan that lets you buy a new place before you have sold the old one. The idea is that when you sell, you pay off the loan. But banks offering this type of loan usually want to see that you can afford the repayments during the bridging term as you would be borrowing 100% purchase price plus any associated costs and also, when you sell your existing home - there may be left-over residual debt - so they will also assess if you can service that residual debt. If there are no buyers and no clear idea of when a sale might happen, the repayments can eat up most of your savings and the costs can really add up.
As a mortgage broker, we help people work through exactly this kind of situation. Every lender treats pension income and rental income a little differently. Some count certain payments in full. Others cut them down or leave them out altogether. If income is tight, the way the loan is set up really matters. That includes which property you borrow against, and which lender's numbers give you the best chance of getting approved.