Are the new negative gearing rules changing how homeowners upgrade?

Key takeaways:

• Selling isn't your only option. Some homeowners may be able to keep their current home as an investment while buying their next property, subject to lender approval.

• Equity and borrowing capacity matter most. Lenders assess whether you can comfortably afford to own two properties.

• Owning two properties means higher costs. Budget for vacancies, maintenance, insurance and other ongoing expenses.

• The right choice depends on your goals. Keeping your home may support long-term property goals, depending on your circumstances.

• Expert advice can help you compare your options. An Aussie Broker can explain your borrowing options, while an accountant or registered tax adviser can help with the tax implications.

The Australian Government's changes to negative gearing are prompting some homeowners to rethink what happens when they upgrade. Rather than automatically selling their current home, some are asking whether they should keep it, rent it out and buy their next property instead.

It can be a way to support longer-term financial goals, but it also comes with extra borrowing, ongoing costs and the responsibilities of becoming a landlord.

Aussie Brokers say more homeowners are asking this question.

Instead of wanting to know how to buy an investment property, they're asking whether they can afford to keep the home they already own while upgrading.

What brokers are hearing from homeowners

It's too early to know whether more homeowners will keep their current home when they upgrade. But Aussie Brokers say more clients are asking whether they can afford to.

While the Australian Government's changes to negative gearing have brought renewed attention to the strategy, the conversations themselves aren't new.

The proposed changes would generally limit future negative gearing concessions on established homes, while existing investment properties purchased before the changes take effect would be grandfathered.

"They were happening anyway," said Melanie Smith from Aussie Windsor. "People are starting to make strategies that they wouldn't have made before."

Rather than asking how to buy an investment property, many borrowers want to know whether they can keep the one they already own. Common questions include:

• Can I afford to keep my current home?

• Would I qualify for another home loan?

• How much equity could I access?

• Would rental income improve my borrowing capacity?

• What would it cost to own two properties?

Those conversations almost always begin with affordability and equity before moving to a broader discussion about long-term goals.

"First, what their affordability is and what their equity position is," Smith said. "But you're also talking to them about what their long-term goals are. What do you want to get out of this? Why are you investing? Why are you moving?"

Brokers say the answer is different for every homeowner. Whether keeping your current home is realistic depends on factors such as your usable equity, borrowing capacity, cash flow, expected rental income and long-term goals.

For some borrowers, those factors make retaining their property a realistic option. For others, selling may provide greater financial flexibility or reduce ongoing debt.

"It's not for everyone," Melanie says. "Some families simply want to get to the point where they're debt free, so it really comes down to people's long-term goals."

Why more homeowners are rethinking the traditional upgrade path

For decades, upgrading meant selling your current home, using the proceeds to fund your next purchase and, if investing was part of the plan, buying an investment property later.

That approach still suits many homeowners. Selling can simplify your finances, reduce how much you need to borrow and provide a larger deposit for your next home.

However, the Federal Budget’s changes to negative gearing have prompted some homeowners to ask a different question: rather than selling, should they keep their current home, rent it out and buy their next principal place of residence instead?

For some homeowners, retaining an existing property may become another option to consider alongside selling. Whether it's the right approach depends on factors such as equity, borrowing capacity, cashflow and long-term financial goals.

For others, selling may remain the simpler and more practical choice. An Aussie Broker can help explain how different lenders may assess each option.

You might also be interested in: How the Federal Budget is influencing property investment decisions

What does "keep, rent and upgrade" actually look like?

Instead of selling your current home to fund your next purchase, the "keep, rent and upgrade" strategy involves retaining your existing property, renting it out and buying a new principal place of residence. At a high level, the journey looks like this:

Own your home → Keep it → Rent it out → Buy your next home

Whether this is achievable depends on your equity, borrowing capacity, income, existing debts and overall financial position. Lender criteria also vary.

You might also be interested in: How buying your second home is different to buying your first

As Abbie Ffrost from Aussie Toowoomba has found, every scenario is different.

"We talk through what it looks like in different scenarios, whether they rent out their current home or do something else — sometimes it suits the customer, but often we find the outcome is very similar," she said.

Depending on their circumstances, homeowners may consider this approach if they want to:

• Retain a property they've owned for many years

• Make use of the equity they've built

• Align with longer-term financial goals

• Keep an existing asset instead of buying another investment property later

Keeping your current home won't be the right option for everyone. Owning two properties comes with additional costs and the responsibilities of being a landlord.

Before deciding whether to keep or sell, it's important to weigh the opportunities and ongoing commitments against your financial position, borrowing capacity and long-term goals.

You might also be interested in: Federal Budget 2026: What the tax changes mean for property investors

What needs to line up financially?

Keeping your current home while buying another isn't simply a matter of choice. Before approving a second home loan, lenders assess whether you can comfortably manage the financial commitments of owning two properties. While assessment criteria vary, there are four key areas they'll typically consider.

Do you have enough usable equity?

Equity is the difference between your property's value and the amount you still owe on your home loan. Depending on your circumstances, you may be able to access some of that equity to help fund your next purchase, reducing the amount of cash you'll need upfront.

However, equity is only one part of the picture. Lenders also assess your borrowing capacity, including your income, existing debts, living expenses and the proposed loan amount. Assessment criteria vary between lenders. For more information, read our guide to using equity to buy another property.

You might also be interested in: Unlocking equity: How to use your home’s value to buy your next home

Can you afford two home loans?

Equity alone isn't enough. Lenders also assess your borrowing capacity, or serviceability, to determine whether you can comfortably repay another loan. This typically includes reviewing your income and employment, existing debts and credit limits, living expenses, available equity and proposed loan amount. Because every lender uses different assessment criteria, your borrowing capacity may vary.

How much rental income will lenders count?

If you plan to rent out your current home, lenders may include some of the expected rental income when assessing your application.

They'll usually request a rental appraisal from a real estate agent, but most lenders don't include 100% of the estimated rent in their calculations. The percentage recognised varies between lenders.

You might also be interested in: What is a good rental yield and how do you calculate it?

Can your budget support two properties?

Owning two properties means budgeting for more than two mortgage repayments. Ongoing costs may include periods when the property is vacant, maintenance and repairs, landlord and building insurance, council rates and other property expenses and unexpected costs.

A financial buffer can help if rental income changes or expenses are higher than expected.

What questions should you ask before deciding?

There's no single answer to whether you should sell your current home or keep it as an investment. The right decision depends on your financial position, long-term plans and how comfortable you are owning two properties. Before making your next move, consider these four questions.

What are you trying to achieve?

Your long-term goals should guide your decision. Selling may help you reduce debt, increase your deposit and simplify your finances. Keeping your current home may suit homeowners looking to retain an existing asset or build wealth through property over time. Ask yourself:

• Will your next home meet your needs for the long term?

• Do you want to build wealth through property?

• Would keeping your current home support your long-term goals?

• Is reducing debt more important than retaining an investment?

• Could you comfortably own two properties?

Lender approval is only part of the picture. You'll also need to feel confident managing the ongoing costs of owning an investment property. Think about whether your budget could comfortably cover:

• Mortgage repayments

• Vacancies between tenants

• Maintenance and repairs

• Insurance, council rates and other property costs

• Changes to your income or circumstances

Would selling put you in a stronger financial position?

Keeping your current home isn't always the better option. Selling could make more sense if it would:

• Provide a larger deposit for your next home

• Reduce how much you need to borrow

• Improve your cash flow

• Lower your ongoing financial commitments

• Simplify your finances

Comparing both scenarios can help you decide which best supports your goals.

Have you spoken to the right professionals?

Before making a decision, it's worth seeking advice tailored to your circumstances. That could include:

• An Aussie Broker to assess your borrowing capacity, explain your finance options and compare lender policies.

• An accountant or registered tax adviser to explain the tax implications of selling or renting out your property.

• A solicitor or conveyancer to help you understand the legal aspects of buying, selling or retaining a property.

The right advice can help you compare your options with confidence and make a decision that supports both your immediate needs and long-term goals.

You might also be interested in: Understanding the conveyancing process in Australia

Making the right decision for your circumstances

Whether you decide to sell or keep your current home, there's no one-size-fits-all answer. The right approach depends on your equity, borrowing capacity, cash flow, long-term goals and whether you're comfortable taking on the responsibilities of owning an investment property.

While the Australian Government's changes to negative gearing have prompted some homeowners to revisit this decision, they're only one part of the picture. Your financial position and plans should remain the biggest drivers of your choice.

Before making your next move, it's worth speaking to professionals who can help you understand the financial, legal and tax implications of each option, including:

• An Aussie Broker to assess your borrowing capacity, compare lender policies and explain your finance options.

• An accountant or registered tax adviser to help you understand the tax implications of selling or renting out your property.

• A solicitor or conveyancer to explain the legal aspects of buying, selling or retaining a property.

The right advice can help you compare both scenarios with confidence and make a decision that supports your long-term goals.

FAQs about keeping your current home when upgrading