How much can you afford? Let’s start with your equity 

If your current home has increased in value over time, you may have built up equity. That’s the difference between what your home is worth and what you still owe on your mortgage.  

Here’s an example: 

Let’s say you originally bought your home for $500,000, with a 20% deposit ($100,000) and a mortgage of $400,000. Over the years, you’ve paid off $80,000 of your home loan. Plus, your home has increased in value to $750,000.   

That means:
- Your current mortgage balance is $320,000 ($400,000 - $80,000) 
- Your home is now worth $750,000 
- Your equity is $430,000 ($750,000 - $320,000) 

Two ways to use that equity 

Now that you know your equity, the next step is figuring out how to use it – and that depends on whether you plan to sell your current home or hold onto it as a rental.  

If you’re selling it 

While equity gives you a rough idea of what you might get, it’s the final sale price (what a buyer pays) that determines how much money you walk away with. You’ll then use that amount towards your next home (as a deposit or otherwise).  

Your Mortgage Link adviser can help you crunch the numbers based on current lending criteria and expected sale price, so you know how much you might be able to borrow before you start house hunting.  

If you’re renting it out 

When you rent out your current home, the equity you’ve built up is still yours, but it’s not liquid. To use it as a deposit on your next home, you need to access it through borrowing against it.   

Lenders typically let you borrow up to 80% of the property’s value for owner-occupied and 65-70% for investment properties (which is your case, as you’re moving out). Using the previous example, the usable equity would be 70% of $430,000 = $301,000.  

There are also a few extra considerations when renting out your current home.  

Rental income will be factored into your borrowing power, alongside the costs of being a landlord (maintenance, rates, insurance, property management, etc). Get in touch to work through your options.   

Plus, tax implications might apply – we recommend contacting your accountant.  

Buying and selling at the same time 

Have you decided to sell your current home and buy the next? Timing both transactions can be tricky, but it’s common.  

One way to manage this is to make your offer on the next property conditional on selling your current home. While this isn’t always favoured by vendors, in a slower market it can be more acceptable and gives you a bit of breathing room. 

Keep in mind: as a seller, you might also be on the receiving end of a conditional offer, or finding an interested buyer may take time, which could mean a longer wait before you can move forward. 

Your Mortgage Link adviser can help you understand your options, including bridging finance. 

Don’t forget the extra costs 

Buying and selling isn’t just about the purchase price. Make sure your budget accounts for: 

- Real estate commissions (typically 2–4% + GST) 
- Marketing and staging costs 
- Legal fees for both the sale and purchase 
- Moving costs, storage and utility reconnections 

These expenses can add up quickly, so it’s worth factoring them in early.  

Can you keep the current loan terms? 

If your settlement dates for selling and buying align perfectly, there’s a good chance you can “substitute security”. In other words, move your current mortgage over to the new property. This can help you keep your fixed interest rate and avoid break fees.  

If the timing doesn’t quite work out, your Mortgage Link adviser can calculate any potential break costs and help you decide what’s best. Either way, we’ll help you work through the options and make a plan that suits your timeline. 

Thinking about moving? Let’s talk 

Moving up the property ladder is a big step, but you don’t have to do it alone. Whether you’re selling, upsizing or turning your first home into a rental property, your Mortgage Link adviser is here to help. 

Ready to explore your next move? Get in touch with your Mortgage Link adviser today. We’ll walk you through your options, help you understand your borrowing power, and create a plan that aligns with your goals. 

Disclaimer:   

Link Financial Group 2022 Ltd (FSP1004590) holds a licence issued by the Financial Markets Authority to provide financial advice. Link Advisory Services Limited t/a Mortgage Link (FSP1004651) is authorised by that licence to provide financial advice. 

The information provided in this article is intended for general informational purposes only and does not constitute financial advice. Every individual’s financial situation is unique, and financial decisions should be made based on your specific circumstances and goals. We recommend consulting with a qualified financial adviser before making any investment, insurance, or mortgage-related decisions 

Please visit https://mortgagelink.co.nz/available-disclosure/ for more information and Disclosure information.