Take the next step towards buying your second property

Maybe you want to take the next step to becoming a real estate mogul. Or perhaps you just want to sell where you are now and buy somewhere bigger. Either way, when your circumstances allow it, it’s totally doable. Just make sure you do your research and make well-informed decisions.

The extra dollar’s in the detail

Whether it’s a holiday house or rental, you’ll likely need a home loan if you’re buying a second property. While your lender treats a second property in just the same way as a first property as far as mortgages go, the good thing is you may not need another deposit because you could use the equity in your existing home instead. This of course depends on the value of the second home and the amount of equity you hold in the first.

If you’re selling your home to buy another one, you can use the proceeds from the sale as the deposit. Keep in mind that if the cost of the new home is large, the deposit required may be more than the equity you release in the sale of your home. In this case, you’ll need to add some cash as well.

Buying a rental

This can be a smart financial decision. If property prices rise, you might make a capital return on the investment and some income from rent.

That said, it’s important to make rational decisions. You might fall in love with a property - and it might love you back - but that doesn’t mean it’s going to make you money. After all, you won’t be living there.

It’s worth thinking about where you want to buy your rental property, as the location will likely differ to where you’d buy your own home to live in. To help decide if a property is right for you, you can use property reports to assess local markets and house values.

You could use the equity in your current house towards a deposit for your next property.

We’re gonna need a bigger house

If you’ve decided that your current house isn’t quite cutting it and you want to upsize, it’s important to consider the ongoing cost of maintaining either property. Calculate how much you currently spend on your mortgage, insurances, maintenance, rates, commuting and other expenses. Add up the expenses for all your property options to help make sure you buy the right house for your financial situation.

Selling and buying - simultaneous settlement

Same day, simultaneous settlement is the ideal situation. It means that the sale of your current home and the purchase of your new home happen on the same day and the funds simply move from one loan to the other. It can be tricky to organise, but it means you won’t have to pay two mortgages at once, or rent a place in between selling and buying. Talking to your Home Finance Manager and settlement agent to see if simultaneous settlement is possible will be your first step.

If simultaneous settlement simply isn’t achievable, your lender can help you look into other options, such as bridging finance. This is a short term loan to cover you during the gap between selling your house and buying your new one.

Remember to factor the costs associated with buying and selling a house into your budget.

The holiday home

If you have enough equity in your existing home, you might be able to use this as your deposit on a holiday home. If not, you may need to top it up with a cash deposit. Remember, there are costs involved in a second property, as you’ll have to pay two sets of rates, insurances and so on. Make sure you budget from the outset for all the expenses that will come with your second property.

Speaking to the right people and getting the right information can make the process a lot smoother.

Things to keep in mind

There are always costs involved when buying and selling properties. You’ll need to allow for the additional costs of stamp duty, settlement and other fees. Other costs might include transfer of land, government registration and search fees, plus bank fees. Take a look at our guide to upfront home buying costs.

Make sure the research is real

Speaking to the right people and getting the right information from the beginning can make the process a lot smoother and give you a head start on making a more informed decision. You might consider: 

  • Talking to your Home Finance Manager
  • Having your current home valued
  • Checking out different neighbourhoods you’d consider buying in
  • Researching the local market you’re interested in
  • Looking at property reports. 

Find a home loan to suit you. 

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Things you should know

The information contained in the Property Report is prepared by a third party. Bankwest is not responsible for the accuracy and completeness of the information generated in the report and it should not be relied upon as a valuation of the subject property.

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48123123124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.