Using the Equity in Your Home to Buy Your Next One

You have owned your home for a while and you are ready for the next one. The money is in the house, but how you get it out matters. Here are the main ways to do it, and what to check first.

What equity is, and how much you can use

Equity is what your home is worth minus what you owe on it. Here is a simple example, for illustration only. If your home is worth $900,000 and you owe $500,000, your equity is $400,000.

That is not all available to you. Lenders generally want you to keep around 20% of the value in the property. In the same example, 80% of $900,000 is $720,000. Take off the $500,000 you owe and the equity you can use is about $220,000. Your lender will also arrange a valuation, so the real figure can be higher or lower. Our usable equity guide goes through the sum in more detail.

Three common ways to do it

1. Sell first, then buy

This is the simplest. Once your home sells, you know exactly how much you have. You are not carrying two loans at once. The catch is timing. You may need somewhere to live between settling your sale and your purchase. Some people ask for a longer settlement on the sale, or rent for a short while.

2. Buy first, then sell

This can feel less rushed, because you are not trying to find a home in a hurry once you have sold. To cover the gap, you may need a bridging loan. NAB describes its bridging loans as often lasting up to 12 months, usually interest only, with higher variable rates, and with borrowing limited to around 80% of the combined value of both properties. Other lenders have their own rules.

The risk is what some lenders call peak debt. For a while you owe on both homes. If your old home takes longer to sell, or sells for less than you hoped, the repayments can be hard to carry. It is important to know your worst case before you sign.

3. Keep your home and buy another

You can use equity in your current home as the deposit on the next one, usually by increasing the loan or setting up a separate loan against it. The home you keep may then become an investment property, which has different lending and tax rules. Speak to your accountant about the tax side.

What about LMI?

Lenders mortgage insurance usually applies when you borrow more than 80% of a property’s value, in other words when your deposit is under 20%. It typically costs between 1% and 5% of the loan, according to Mozo. It protects the lender, not you. Many people add it to the loan rather than pay it upfront.

When you are using equity, the way the loans are set up can change whether LMI applies. That is worth checking before you decide.

Questions to ask first

1. What is my home really worth, and what do I owe?
2. How much can I borrow now? Rates and lender rules have changed, so an old figure may be out of date.
3. Do I need to sell first? Or could I comfortably carry both loans for a while?
4. What will it cost to sell and buy? Agent fees, stamp duty, legal costs and moving all count.
5. What if the sale takes longer than I expect? Have a plan for that.

Sources and when we checked

Checked on 21 October 2026. Sources: NAB, bridging loan information; Mozo, lenders mortgage insurance guide. Figures in the worked example are illustrative only and are not a quote or an offer. Rules, prices and rates can change, so confirm with the official sources and your lender before you buy. This article is general information only and is not personal advice. It is not legal or tax advice. Speak to a solicitor and an accountant about selling, buying and keeping property.