Home Loans for Property Downsizers
Downsize With Clarity, Confidence & Support
Selling your home and moving into something more manageable is a major financial and lifestyle decision.
You may want to reduce debt, release equity, lower maintenance or move closer to family and essential services.
For some people, downsizing means becoming debt-free. Others prefer to retain part of their sale proceeds for retirement or future expenses.
At My Finance Consultants, we help you understand your lending position before you sell or purchase.
We compare suitable options across our panel of more than 40 lenders and structure the finance around your next move.
Understand Your Downsizing Budget
Your expected sale price is only one part of your available budget.
Your existing home loan, selling costs and other expenses must first be deducted from the sale proceeds.
You then need to consider your next property's purchase price, stamp duty, conveyancing and moving costs.
This helps determine whether you can purchase without borrowing or whether a smaller home loan may still be required.
You may also want to retain a cash buffer rather than committing all available funds to the new property.
Our Property Buying Power Calculator can help estimate the property price within reach.
You can also use our Stamp Duty Calculator and Mortgage Repayment Calculator.
Where borrowing is required, our Borrowing Power Calculator provides an initial estimate.
Actual borrowing capacity will depend on the lender's assessment of your complete circumstances.
Should You Sell or Buy First?
Selling Before You Buy
Selling first provides greater certainty about how much money is available for your next purchase.
It can also reduce the risk of carrying two properties or relying on an estimated sale price.
However, you may need temporary accommodation, storage or a second move while searching for your next home.
Buying Before You Sell
Buying first can allow you to secure the right property without rushing your current home onto the market.
However, you may require bridging finance and must manage the costs of holding two properties temporarily.
There is also a risk that your existing property sells later or for less than expected.
Coordinating Both Settlements
Closely aligned settlements can reduce the gap between selling and purchasing.
However, the contracts, finance and settlement dates need careful coordination.
Your solicitor or conveyancer should review the contract conditions and settlement arrangements before you commit.
Home Loan Options for Downsizers
Purchase Without Another Home Loan
Your sale proceeds may be sufficient to repay your existing loan and purchase your next property outright.
This can reduce regular expenses and remove home loan repayments.
However, consider how much accessible cash will remain after purchasing and paying transaction costs.
Take Out a Smaller Home Loan
You may prefer to retain some of your sale proceeds and use a smaller home loan.
This can provide additional financial flexibility after settlement.
Any new borrowing must still satisfy the lender's affordability requirements.
We compare the repayment impact, loan term and total borrowing cost before recommending a structure.
Port Your Existing Home Loan
Loan portability, or substitution of security, can allow an eligible borrower to replace the property securing an existing loan.
This may be useful when retaining an existing fixed rate, offset account or other loan features.
Not every loan is portable, and the new property must satisfy the lender's requirements.
Settlement timing, valuations and any required loan reduction should be confirmed before you commit.
Use Bridging Finance
Bridging finance can help fund a new home before your current property is sold.
The lender generally considers your peak debt while both properties are held and your expected end debt after the sale.
Interest and holding costs can increase if your existing property takes longer to sell.
Bridging finance is subject to equity, serviceability, valuation and lender approval.
We assess the expected sale proceeds, repayments and lending structure before recommending this option.
Lending Later in Life
Income, Retirement & Loan Term
Age alone does not automatically determine whether a home loan can be approved.
The lender will assess whether repayments can reasonably be maintained throughout the proposed loan term.
This may include your current income, expected retirement timing and future income sources.
Where a loan extends into retirement, the lender may require a realistic strategy for reducing or repaying the debt.
This is commonly referred to as an exit strategy.
We compare suitable lender policies and help present the relevant financial information clearly.
Your Next Property Matters
The property you purchase can also affect your finance options.
Standard houses and strata apartments are generally financed differently from some retirement-village arrangements.
Retirement villages may use strata, leasehold, company-title, loan or licence structures.
Some arrangements may not provide acceptable security for a standard home loan.
Have the ownership structure, ongoing charges and exit costs reviewed before making an unconditional commitment.
For strata properties, a strata report can also help identify planned works, defects or special levies.
Superannuation & Age Pension Considerations
Downsizer Contributions to Super
Eligible people aged 55 or older may be able to contribute proceeds from selling their home into super.
The maximum downsizer contribution is $300,000 per eligible person, subject to the relevant eligibility requirements.
You or your spouse must generally have owned the home for at least 10 years.
The contribution must generally be made within 90 days of receiving the sale proceeds, and the required form must be provided to your super fund.
You do not actually need to purchase a smaller property to use the downsizer contribution rules.
A financial adviser or superannuation specialist should confirm whether making the contribution is appropriate for you.
Age Pension Considerations
Selling your principal home can affect your Age Pension and other means-tested payments.
The portion of sale proceeds intended for another principal home may be exempt from the assets test for up to 24 months.
In qualifying circumstances, a further exemption of up to 12 months may apply, giving a maximum period of 36 months.
Eligible proceeds held in financial assets are also subject to specific deeming treatment during the exemption period.
Surplus funds not intended for your replacement home may be assessed differently.
Services Australia or a licensed financial adviser can help confirm how your particular transaction may affect your payments.
Our Downsizer Home Loan Process
Review Your Position
We discuss your current property, existing home loan, next-home plans and preferred timing.
We estimate your likely sale proceeds after debt and selling costs.
Compare Your Options
We consider whether selling first, buying first or coordinating settlements is more practical from a lending perspective.
Where borrowing is required, we assess options including a smaller home loan, portability or bridging finance.
Lender Comparison & Application
We compare suitable lenders based on your income, borrowing requirements, property and proposed loan term.
We also compare rates, comparison rates, fees and relevant loan features.
Once you choose an option, we prepare the application and coordinate the supporting documentation.
Approval, Settlement & Reviews
We manage lender requirements and coordinate with your solicitor or conveyancer where settlement timing affects the finance.
After settlement, we can periodically review your interest rate, loan features and structure.
Frequently Asked Questions
Do I Need a Home Loan After Downsizing?
Not necessarily. You may have enough sale proceeds to purchase outright, or you may require a smaller home loan.
Your complete transaction costs and desired cash buffer should also be considered.
Should I Sell Before Buying?
Selling first provides greater certainty about your purchasing budget.
Buying first can offer more flexibility when finding a new home but may require bridging finance.
We can compare both approaches based on your financial position and timing.
Will My Age Affect Home Loan Approval?
Age alone does not automatically determine approval.
The lender will consider your income, proposed loan term and ability to maintain repayments.
If the loan extends into retirement, an acceptable repayment or exit strategy may be required.
What Is Loan Portability?
Loan portability allows an eligible borrower to replace the property securing an existing home loan.
It may allow you to retain the existing loan rather than refinancing.
Lender approval, valuation and settlement requirements still apply.
What Is a Bridging Loan?
A bridging loan is short-term finance that can help you purchase before your current home is sold.
The lender assesses the debt held during the bridging period and the expected balance after your sale.
Interest, time limits and other lending conditions apply.
Can I Finance a Retirement Village Property?
It depends on the ownership structure.
Some strata or freehold properties may be financeable, while loan, licence or other occupancy arrangements can be more difficult.
The legal structure should be reviewed before you commit.
Can I Make a Downsizer Contribution to Super?
Potentially, if you meet the relevant age, ownership, property and timing requirements.
Eligible people can contribute up to $300,000 each from qualifying home-sale proceeds.
Professional advice should be obtained before transferring the funds.
Can Downsizing Affect My Age Pension?
Yes. Your principal residence and sale proceeds can receive different treatment under the means tests.
Temporary exemptions may apply to funds intended for your next home, while surplus funds can affect your entitlement.