The problem is timing, not money
Most people moving up have enough equity. What they do not have is two dates that line up.
You need the sale proceeds to fund the purchase, but you cannot sell until you know you have somewhere to go. There are three ways through it, and the right one depends more on your appetite for risk than on your finances.
Your three options
Sell first
You know exactly what you have to spend and carry no double debt. The cost is pressure at the other end, and possibly renting in between.
Buy first, with bridging
You secure the home you want and sell after. You carry both loans for a period, and interest accrues while you do.
Settle both on one day
The tidiest outcome and the hardest to arrange. Sale proceeds flow straight into the purchase, and no bridging is needed.
How bridging finance works
Bridging is a short-term loan covering the gap between buying the new home and selling the old one.
- Peak debtThe total you owe while holding both: your existing loan, plus the new purchase price and buying costs, less any deposit you contribute.
- The holding periodMost lenders charge interest only on the bridging portion, and many capitalise it — adding it to the balance rather than requiring a monthly payment.
- End debtOnce the old home sells, the proceeds reduce peak debt down to the ongoing loan you are left with.
What the upgrade really leaves you
It is easy to treat the equity in your current home as your new deposit. It is not, quite.
- From the sale: agent commission and marketing, your loan payout and any discharge fee, legal costs.
- From the purchase: stamp duty on the new place, legal fees, inspections, lender fees.
The gap between the two numbers is often tens of thousands of dollars. Better to know that before you set your budget than after you have made an offer.