Posted on March 30, 2018

So you’ve got the perfect block of land in the perfect location, and all you want is a brand new home to suit your family and lifestyle. A knockdown rebuild is a great solution, but it comes with a not-so straightforward financing. This blog will shed light on your options, but be sure to speak with a home loan specialists before signing your building contract.

1. Construction loan

The most common way to finance a knockdown rebuild project is with a construction loan. These loans are designed so that you can draw down on borrowed funds as you go, rather than receiving a lump sum from the bank. You’ll be able to borrow up to 95% of the value of the land plus construction costs and minus demolition costs.

2. Refinancing

If you’ve already got a home loan, you may speak to your lender about refinancing. In this option, you’d make use of the equity gained on your home to reduce your loan-to-value ratio, which can save you a lot of money. With a refinance, you may also qualify to have your lender’s mortgage insurance premiums waived.

3. Relocation loans

This financing option is for people who live in one location, and choose to do a knockdown rebuild in another location. Relocation loans have a couple of great advantages. Firstly, you don’t have to move house twice, saving yourself additional moving costs. Secondly, you can get this loan before selling the home that you live in. The loans typically allow 6 months for construction and 6 months for you to sell.

4. Timing your valuations

While not a financing option per se, strategic timing of your valuation is another method of finding the best financing solution for your knockdown rebuild. The value of your old home will vary before demolish to after, and even once construction commences. The valuation will impact on how much you can borrow and whether you need lender’s mortgage insurance. Speak to your home loan specialists about how to best time your valuation.

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