01 Jul 2025 Next Home Buyers Guide: How to Buy Your Second (or Third) Home in Melbourne
Melbourne’s property market is known for steady growth, diverse suburbs and a mix of inner-city buzz and leafy streets. Many buyers eye a second or third property here for rental income, extra space, a weekend retreat, or simply to purchase another family home.
But costs rise, competition intensifies, and loan choices multiply beyond your first purchase. That’s why next home buyers need a clear roadmap that covers budgets, finance options, suburb research, inspections and settlement steps to tackle each purchasing phase with confidence.
This guide lays out those essential steps so you can plan wisely and avoid surprises. Let’s dive into the first step: budgeting for your second home purchase.
Ready to buy your next home? Our Melbourne mortgage brokers at EverLend will tailor your loan structure for an investment property or owner-occupier purchase. Call 03 7036 3356 or visit www.everlend.com.au to chat with our friendly brokers.
Budgeting for Your Second Home Purchase
Having clarified your priorities, the next imperative is to establish a comprehensive budget framework. An accurate financial plan will help you anticipate every cost and minimise unforeseen expenditures.
- Calculate your deposit requirement: Aim for at least a 20% deposit on your second home to avoid Lenders Mortgage Insurance. Ask your mortgage broker about using home equity or a cash-out home loan to bolster your deposit.
- Factor in stamp duty and legal fees: In Melbourne, stamp duty on an investment property can run up to 5.5% of the purchase price. Don’t overlook conveyancing costs ($800–$2,000) and lender’s settlement fees when calculating your total outlay.
- Estimate ongoing holding and moving costs: Budget for council rates, insurance and strata levies if you purchase a unit. Also include property management fees (typically 7–10% of rental income) and one-off moving expenses.
- Weigh rental income against owner-occupier perks: Rental yield can offset mortgage repayments, but introduces vacancy and management risks. An owner-occupier interest rate may be lower; discuss both scenarios with your mortgage broker.
- Use home loan calculators and seek pre-approval: Online calculators allow you to model repayments at current interest rates. A broker can compare LVR limits, loan structures and fees to enhance your borrowing capacity.
- Review serviceability and debt commitments: Lenders assess your income, living expenses and existing liabilities when you apply. Your broker can demonstrate how reducing other debts or extending your loan term can improve serviceability.
- Include a buffer for potential interest rate rises: Lenders typically assess your serviceability using a buffer (often 2.5% above the advertised interest rate). Work with your broker to factor this into home loan calculators so your budget can absorb future rate increases.
- Allocate funds for renovations and ongoing maintenance: Second homes or investment properties often need updates to attract quality tenants or boost resale value; set aside at least 1–3% of the property’s market value each year. Consult your mortgage broker or a property manager for Melbourne-specific cost estimates.
Second Home Loans and Financing Options
With a clear budget, it’s now time to focus on selecting the optimal financial structure for your second home. The right loan can save you thousands in interest, fees and tax over time.
Investment Property Loan
These loans suit buyers who plan to rent out their second home and typically carry interest rates 0.2–0.5% above owner-occupier rates. Melbourne mortgage brokers such as the team at EverLend can compare LVR limits (often capped at 80%), lender fees and any Lenders Mortgage Insurance requirements across major lenders.
Owner-Occupier Loan
If you intend to live in your next property, you may access lower owner-occupier interest rates and potentially higher LVR limits. A broker can advise on fixed, variable or split-rate options to match your cash flow and financial goals.
Bridging Loan
Bridging finance covers the gap when you buy before you’ve sold your existing home, typically with interest-only repayments on the extra amount. Lenders in Melbourne apply a 2.5% buffer over the advertised rate and may charge higher setup fees, so review terms carefully with your mortgage broker.
Cash-Out Home Loan
By refinancing your current mortgage, you can tap into home equity to boost your deposit or fund renovations on your second home. A broker will model how the new LVR affects your repayments and whether you’ll incur Lenders Mortgage Insurance.
Interest-Only Loan
Opting for an interest-only period (1–5 years) on an investment loan can improve your initial cash flow by reducing repayments. Bear in mind that the principal doesn’t reduce during this time, so plan for potentially higher repayments once the period ends.
Split Loan with Offset Account
A split loan lets you fix part of your rate and keep the remainder variable, while an offset account linked to the variable portion can reduce interest costs. Melbourne mortgage brokers can offer this structure for investors seeking flexibility and tax-effective strategies.
Maximise your borrowing power with EverLend’s Melbourne mortgage brokers, specialising in second-home loans and bridging finance. Call us up for a free consultation at 03 7036 3356 or head to www.everlend.com.au today.
Best Melbourne Suburbs for Your Second Home
When buying again in Melbourne, focus on three core criteria: capital growth, rental yield and lifestyle amenities. These factors shape your property purchase, boost rental income and enhance long-term market value.
Footscray
- Strong capital growth (averaging 6% p.a.) and median rental yield around 4.5%.
- Inner-west cafés, transport links and proximity to the CBD deliver prime lifestyle benefits.
Brunswick
- Robust rental yield near 5% and steady home values driven by high demand.
- Eclectic music venues, parks and dining precincts make it a favourite for short-term Airbnb rentals.
St Kilda
- Coastal lifestyle supports both holiday-home appeal and solid rental income.
- Market conditions favour consistent capital growth; property management firms rate it highly for investors.
Coburg
- Family-oriented suburb with reputable schools, parks and steady rental yields (~4%).
- Balanced market value increases suit a growing real estate portfolio managed via a local real estate agent.
Essendon
- Excellent transport, shopping hubs and leafy streets fuel capital growth.
- Rental yield hovers around 4%, and community events add to its lifestyle amenities.
Before you commit, consult a mortgage broker to review property reports, compare loan structures and align each suburb with your financial goals.
Check out our other Melbourne suburbs guides for your reference on choosing your next place:
Fastest Growing Suburbs in Melbourne
Best Suburbs to Live in Melbourne
Best Suburbs in Melbourne for Families
Best Investment Suburbs Melbourne
Most Expensive Suburbs in Melbourne
Best Melbourne Suburbs for Retirees
Inspection Checklist for Next Home Buyers
With finance in place and suburbs shortlisted, it’s time to inspect your future property. A thorough checklist helps next home buyers identify issues early and make informed decisions.
- Structural cracks and foundation integrity
- Roof condition, gutters and downpipes
- Signs of damp, mould or water stains
- Termite and pest damage
- Plumbing fixtures, water pressure and drainage
- Electrical wiring, power outlets and safety switches
- Heating, cooling and ventilation systems
- Insulation levels and energy-efficiency features
- Window seals, door locks and weatherproofing
- Smoke alarms and fire-safety compliance
- Strata records, levies and by-laws (for units)
- Title boundaries, fencing and easements
- Condition of appliances and built-in fixtures
- Car parking, garage access and security
- Broadband connectivity and mobile signal strength
- Noise levels and neighbourhood character
- Local amenities, public transport and schools
Conveyancing, Stamp Duty, and Settlement
Once your offer is accepted, your conveyancer will review the Section 32 vendor statement, conduct title searches and examine any easements or covenants. They’ll prepare and exchange contracts, lodge necessary documents with Land Victoria and coordinate settlement with your lender and real estate agent.
Legal costs in Melbourne usually range from $1,000 to $2,000 plus disbursements for searches and land title registrations.
Victoria does not offer stamp duty concessions for second properties. You must pay full stamp duty, calculated on the higher of market value or purchase price, within 30 days of settlement. Your conveyancer can estimate this cost up front so it’s included in your budget.
After exchange (when you pay the deposit, typically 10%), there’s a cooling-off period of three business days for private sales. Settlement dates are agreed at exchange and usually fall 30–60 days later, though you can negotiate extended or simultaneous settlement if you’re selling and buying on the same day.
On settlement day, funds are transferred to the seller, the title changes hands, and you collect the keys.
From loan structuring to leveraging home equity, EverLend’s Melbourne mortgage brokers guide you through every step of your second home purchase. Call us now at 03 7036 3356 or visit www.everlend.com.au to schedule your free consultation.
Frequently Asked Questions (FAQs)
How to buy a second home without selling the first in Australia?
You can tap into your first property’s home equity through a cash-out home loan or arrange bridging finance to cover your deposit and repayments. Speak with Melbourne mortgage brokers at EverLend to compare bridging loan options and assess serviceability.
How much of a deposit do you need to buy a second house?
Most lenders expect at least a 20% deposit on a second home to avoid Lenders Mortgage Insurance. Using a home loan calculator and advice from a broker helps you factor in stamp duty, legal fees and moving costs.
How much equity should you have before buying a second home?
Aim for a minimum of 20–25% equity in your existing property so you can meet LVR limits and keep LMI to a minimum. Your broker can review your loan structure and may recommend a cash-out refinance if you need extra deposit funds.
Is the second house easier to buy?
Generally not. Lenders apply a serviceability buffer, higher interest rates and stricter LVR limits on second homes or investment property loans. Pre-approval from Melbourne mortgage brokers and clear budgeting will make the process smoother.
Wrapping Up
Next home buyers can feel confident moving into their second (or third) property with the right plan and support. Our St Kilda-based team of Melbourne mortgage brokers specialises in helping second-time home buyers compare home loan options, structure repayments and explore bridging finance or investment property loans.
If you’re ready to purchase your second house, we can help! We cover the wider Melbourne area and offer a complimentary consultation to help you map out your budget, pre-approval, and guide you through the loan process. Call us on 03 7036 3356 or visit www.everlend.com.au to book your consultation and start exploring your options.