Browse Forums Building A New House Re: Knock down and rebuild - do I need to tell the bank? 2Feb 02, 2011 3:58 pm Happy, Healthy Free Range Wessex Saddleback Pigs My doom and gloom paperwork nightmare viewtopic.php?f=31&t=32170 Construction viewtopic.php?f=31&t=43653 Re: Knock down and rebuild - do I need to tell the bank? 6Feb 02, 2011 7:24 pm Happy, Healthy Free Range Wessex Saddleback Pigs My doom and gloom paperwork nightmare viewtopic.php?f=31&t=32170 Construction viewtopic.php?f=31&t=43653 Re: Knock down and rebuild - do I need to tell the bank? 7Feb 02, 2011 9:15 pm A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Knock down and rebuild - do I need to tell the bank? 10Feb 03, 2011 8:04 am As mentioned above, Yes you need to tell them but here's why (actually it's more a case of ask the bank) You don't own the house or the land its on, the Bank does. Even on things relating to the house, it should be indicated that your lender is the "interested party". House insurance (not contents)Rates notices should all have the lenders details as well. If the house burnt down or was damaged in some way beyond repair, the lender would get the check not you. The reasoning is that demolishing the house will change the value of the property, it may not be by much, it might even go up if it was able to be subdivided depending on the state of the property and area but the value will change. I'll use my place as an example. All of the figures are false but kept in line to show how it can work. Lets say its worth $300k as it is and I have a mortgage of $175k on the property. I paid $200k and have paid off $25k principal in 6yrs Once we knock the house down, the value of the property will be $225k. From the banks perspective if I default and the house isn't built, they will still get their money as the property is worth more than I owe. The valuations are done by independent inspectors and are lower than what your local scumbag real estate agent will tell you.(**disclaimer**I feel OK with scumbag bit as I briefly thought about getting into and accepted I would have to sell my soul) If I bought for $250k owed $245k and it was worth $300k but still only $225k without the house, they might not let me knock it down. but thats up to them, they need to be convinced that the works being done will bring the value up. You may need to get a letter from the lender stating you are authorized to demolish. Mine just told me I could and they don't issue such letters but some do. The good news: It's not that big of a deal. They'll want you to go on a construction loan for the build time, but thats better as you only pay interest on the funds drawn, then once the house is done you can combine the two loans into one variable or fixed loan, Or keep them separate, and have one of each. Also you'll have to cover any shortfall of borrowing before they release any funds. Say we borrowed another $300k on top of our original mortgage but the house costs $325k. We have to pay the first $25k before they'll cut a check to the builder. You will also need to prove you can pay the shortfall with either savings or gifts. If you can't they'll either require you to borrow more (and prove again you can cover the payments) or they'll reject the loan. Its a longer process to get lending approval but not that hard. We're going to keep the loans separate as we come into sums of money sporadically and it'll be good to be able to focus different amounts on each loan. Eventually it'll meant reduced minimum payments @ the 15-20yr mark. One downside will be you won't be able to go to a different lender, as your current lender won't release equity to another company without being paid for that share. We've had the offer of a short term tenant whilst waiting for CDC/DA home approval and demolition for our knock down rebuild. It would achieve a pretty low rent as it's… 0 13759 Hi I live in a 100yr old semi and my neighbour added an additional floor last yr and our architect has advised that we can knock down our semi and build a free-standing… 0 37723 if the original house is in good condition most of what you listed could be added in stages without the need for KDR and costs and disruption of having to live elsewhere… 1 13685 |