Home Loans for Downsizers in South East Melbourne, Your Options Explained
You've spent years building equity in a home that no longer fits the way you live. The kids have moved out, the maintenance feels relentless, or you simply want to free up capital and simplify. Downsizing makes sense on paper, and in South East Melbourne's market, the numbers can work strongly in your favour.
The lending side is where it gets more complicated. Selling and buying at the same time, accessing equity, navigating super contributions, and finding a lender who understands retirement income — these are the decisions that catch downsizers off guard. Getting them right means more money in your pocket and fewer sleepless nights around settlement.
Our team helps downsizers across South East Melbourne structure their move from start to finish, comparing across 60+ lenders. The downsizing home loan side of it is where most of the difference is made.
Key takeaways
- Downsizer super contributions allow up to $300,000 per person from sale proceeds.
- Bridging finance lets you buy before you sell without needing two mortgages simultaneously.
- Lenders assess retirement income differently — super pensions, investments and assets all count.
Is downsizing in South East Melbourne worth it financially?
For most downsizers in South East Melbourne, the numbers are compelling. House medians across the area run from $1,280,000 in Moorabbin and $1,298,750 in Cheltenham through to $3,250,000 in Brighton and $4,960,000 in Toorak. Selling a family home in this range and buying a well-positioned apartment or townhouse — often at a unit median of $500,000 to $740,000 — can release hundreds of thousands in equity while keeping you in the suburb you know.
That equity gap is what gives downsizers genuine financial flexibility. Some use it to clear the remaining mortgage and buy the next property outright. Others keep a small loan, invest the surplus, or contribute a portion to super. The right structure depends on your income in retirement, your timeline and how you want to use the freed capital — which is why the lending decision matters as much as the property decision.
What we see most often is that downsizers underestimate how much choice they actually have at this stage. They assume a smaller property means a simpler transaction, and it often does — but the structure around the money is where there's real room to move, and most people haven't thought through more than one option before they call us.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
How do lenders assess downsizers' income and borrowing capacity?
Lenders assess downsizers the same way they assess any borrower — your income, your existing debts and your living expenses — but the income types are almost always different from a standard working application. Understanding how each income stream is counted is what determines whether you need a loan at all, and how large it can be.
What lenders typically count for downsizers:
- › Superannuation pension income: account-based pension drawdowns are accepted by some lenders, assessed against the fund balance and the drawdown rate.
- › Investment income: dividends, managed fund distributions and rental income are counted at a shaded percentage — typically 80% of gross — with property holding costs added on top.
- › Age Pension and supplements: accepted by most lenders and treated as stable government income, usually counted in full.
- › Part-time or consulting income: assessed like any variable employment income, with most lenders wanting a 12-month history in the same field.
- › Loan term against retirement age: lenders assess whether the proposed loan term is realistic given your age. A shorter loan term compresses the repayments, which affects serviceability even if the loan amount is modest.
One practical point: if you're still working part-time and expect to stop in two or three years, some lenders will want an exit strategy — a credible explanation of how the loan will be serviced or repaid once employment income stops. Others assess only the current income. Lender choice matters here more than the rate.
What government strategies can downsizers use?
Two federal programs make a material difference to downsizers. Neither is widely understood, and both have conditions that catch people out.
The strategies worth knowing:
- › Downsizer super contribution: if you're 55 or older and you've owned your home for at least 10 years, you can contribute up to $300,000 per person — or $600,000 per couple — from the sale proceeds directly into super. This sits outside the standard contribution caps and must be made within 90 days of settlement. It's one of the most tax-effective moves available to older Australians selling a principal residence.
- › Home Equity Access Scheme (HEAS): a government-run equity release scheme for those of Age Pension age who own Australian real estate. You can access up to 150% of the maximum Age Pension rate as a fortnightly payment, plus a lump sum up to twice a year. The rate is 3.95% p.a., compounding fortnightly — materially lower than a commercial reverse mortgage — and the No Negative Equity Guarantee means you'll never owe more than the home sells for.
- › Reverse mortgage (commercial): available from age 60 at most lenders, with typical borrowing starting around 15% to 20% of property value at 60, rising roughly 1% per year of age. Rates are materially higher than standard home loans. The same No Negative Equity Guarantee applies under the National Credit Code. Because of the interaction with the Age Pension, aged care costs and your estate, these require advice from a licensed financial adviser — not just a broker.
Source: Services Australia (HEAS); Australian Taxation Office (downsizer contribution).
Source: Services Australia and Australian Taxation Office.
What does it cost to buy your next home in South East Melbourne?
CoreLogic data shows unit medians across South East Melbourne running from $470,000 in Ripponlea and $500,000 in Prahran through to $1,200,000 in Hampton and Brighton. Most downsizers buying a well-located apartment in the inner suburbs — Hampton, Sandringham or Glen Iris, for example — are looking at a unit median in the $700,000 to $1,200,000 range.
Where there's a remaining mortgage on the family home or you're buying before you sell, the deposit and cost picture changes. A few things to weigh:
The options worth weighing:
- › Buy outright from sale proceeds: no ongoing loan · simplest structure · requires clean timing between sale and purchase · possible gap covered by bridging
- › Small loan on the new property: keep some capital invested · monthly repayments on retirement income · loan term matters for serviceability · lender exit strategy may be required
- › Bridging finance: buy before you sell · interest capitalises during the bridge · assessed on end debt, not peak debt · typically 6 to 12 months
On transfer duty, downsizers buying in Victoria pay standard transfer duty unless they qualify for the pensioner or concession card duty reduction — a full exemption at dutiable values up to $600,000 and a partial concession to $750,000. Most South East Melbourne units sit above those thresholds, so full duty applies in most cases. Direct the exact figure to the State Revenue Office Victoria duty calculator.
Source: CoreLogic (via YIP, June 2026); State Revenue Office Victoria.
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When does downsizing not make financial sense?
Downsizing is compelling, but it's not the right move in every situation. If the property you're selling is subject to capital gains tax — because it has been used as an investment at some point — the tax on the gain reduces what you net from the sale and changes the numbers significantly. Your accountant's view matters here before you act.
If the suburb you want to move to has a unit median close to what your house would sell for, the equity release is modest after agent fees, legal costs and any stamp duty. Running the numbers first, rather than assuming a large gap, is the honest starting point.
There's also a timing risk. If you sell and then cannot find the right property at the right price, you're renting in a market you know well — and Bay Street and Hampton Street are not inexpensive places to rent while you wait. Bridging finance or a longer settlement on your outgoing property can manage that gap, but it adds cost and complexity that needs to be factored in.
How to downsize in South East Melbourne, step by step
Most of the complexity in a downsize comes from sequencing — getting the sale, the purchase and the finance aligned. A broker coordinates the lending piece so the rest of the move can follow.
Step 1: Talk to us
We start by understanding your timeline, your target property type and how you want to use the equity from the sale — that shapes every lending decision that follows.
Step 2: Assess your position and structure the finance
We look at your current equity, retirement income streams and whether bridging finance or a simultaneous settlement suits your situation, then confirm what lenders will work with your income type.
Step 3: Match the right lender and apply
We identify which lenders on our panel are comfortable with your income composition and loan term, prepare the application, and manage the submission so nothing holds up your purchase timeline.
Step 4: Coordinate through to settlement
We stay across both transactions — the sale and the purchase — so your broker, conveyancer and agent are working to the same dates and the finance lands when it needs to.
Where I see downsizers lose ground is by waiting until the sale is underway before thinking about finance. By then the timing is locked, and the lender options narrow. Getting the structure right before the property goes to market gives you room to move — and that room is usually worth more than the rate.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What approval challenges do downsizers face?
The hurdles for downsizers are almost all income-related — the property is rarely the problem, but the income type often is.
Where downsizers run into difficulty:
- › Short loan terms compressing repayments: a 10 or 15-year loan term on a modest balance can produce monthly repayments that look large relative to pension or investment income, even when the total debt is low. Some lenders are more flexible on term assessment than others.
- › Superannuation account balances assessed inconsistently: account-based pension drawdowns are counted differently depending on the lender — some apply a factor to the fund balance, others assess only the current drawdown amount. The difference can materially change your assessed income.
- › Exit strategy requirements: lenders who ask how a loan will be repaid once employment income stops need a clear, credible answer — whether that is drawing down the super balance, selling an asset, or the proceeds of a future estate. A poorly prepared exit strategy stalls the application.
- › Bridging finance timing risk: if the outgoing property doesn't sell within the bridge term, the peak debt remains higher for longer and interest capitalises. Most lenders want the outgoing property listed before they'll approve a bridge — and some want a contract in place. Whether your sale is open or closed determines which lenders will even look at the file.
Frequently Asked Questions
Can downsizers get a home loan in retirement?
Yes, retirees can qualify for a standard home loan using super pension drawdowns, investment income or the Age Pension. The key variable is whether the loan term and repayments are serviceable on the income available.
How does bridging finance work for downsizers?
Bridging finance combines the new purchase loan with the existing mortgage into one facility while the sale completes. Interest is capitalised during the bridge — typically 6 to 12 months — and you're assessed on the end debt, not the peak.
What is the downsizer super contribution and who qualifies?
The downsizer contribution lets Australians aged 55 and over put up to $300,000 per person from a home sale into super, outside the standard caps. You must have owned the property for at least 10 years and contribute within 90 days of settlement.
Is a reverse mortgage or the HEAS better for downsizers?
The HEAS rate of 3.95% p.a. is materially lower than a commercial reverse mortgage, making it the lower-cost option for eligible borrowers. Commercial products offer more flexibility on amounts and lenders — a licensed financial adviser can compare both for your position.
Do downsizers pay stamp duty on the new property in Victoria?
Yes, standard transfer duty applies. Pensioner and concession card holders qualify for a full exemption up to $600,000 or a partial concession to $750,000. Most South East Melbourne units sit above those thresholds, so full duty applies in most cases.
Should downsizers use a mortgage broker or go to their bank?
A mortgage broker, every time. Lenders assess retirement income and loan terms very differently, and comparing across a panel finds policies that suit your income mix. Your existing bank is one option, not a benchmark for what's available.
Your Next Steps
For most downsizers, the move to a smaller home in South East Melbourne is one of the most financially significant decisions of this stage of life. Getting the structure right — the sequencing of sale and purchase, the income assessment, and the super strategy — is what separates a smooth transition from a stressful one. The lending is where it either comes together or it doesn't.
Ready to find out which lenders will work best for your downsizing home loan? Contact the EverLend team or call 03 7036 3356. We'll canvas our 60+ lender panel and find the most suitable options for your circumstances.
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External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
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