Browse Forums Building A New House 1 Oct 04, 2011 8:44 pm Hi all, Long time lurker first time poster Finally made the decision to knockdown and rebuild our house in Brisbane - great current area and land size, finding a new great house in the right place will cost too much, etc. However the plan is to be smart about it and make sure we're in a good financial position before we start. Which leads me to my questions regarding the financial implications of actually doing a knockdown & rebuild. First a few approximate figures House & Land value before knockdown - $400,000 Approx Land value when starting knockdown - $275,000 Current Loan balance when starting knockdown - $200,000 Advanced payment (redraw amount of loan) - $100,000 new house, site costs, - $340,000 flooring, electrical, demolition, landscaping, approvals, etc - $60,000 = total kd&r - $400,000 So here are the questions 1) Using these figures, when the bank does a valuation for the new construction loan what is the amount that can be borrowed - is it 95% of 340,000 or 400,000 or a different figure? if its solely based on the building contract price can these things be written into the contract price? can you be approvedfor / borrow over the contract price? 2) As the old house will be knocked down, the equity against the original loan will drop (ie instead of being $200,000 (house & land - remaining balance), it will be $75,000 (land - remaining loan balance) but does this impact the redraw (payments in advance) amount of the loan? Or does the change in equity only impact LMI calculations for the construction loan? I'm sure I'll have more questions - so any other points you have , that I havent covered is greatly appreciated Thanks Fq Re: Knockdown & Rebuild - Financials 2Oct 04, 2011 9:33 pm Fq, The most banks will lend you for a construction loan is 80%, so from your figures I'm thinking 80% of $675,000 = $540,000 assuming that is what the valuer comes back with. So you need $135,000 in equity. We found the valuer speculated on the value of the land based on past sales, but would only add the value of the house contract and landscape quotes, rather than what recently built homes were selling for in the area. I don't quite follow your second question, I don't see how the act of knocking down the old house affects the loans here, the bank will only approve the knockdown if they believe you intend to replace it with something of higher value, you still owe the same amount. Be careful when the new loan is drawn up that you still have access to your $100,000 in redraw since your first progress payment to the builder normally comes from you, not the bank. Chatz Re: Knockdown & Rebuild - Financials 3Oct 04, 2011 9:46 pm Hi, For my loan the bank are lending me a bit under 90% as a construction loan. My broker told me the maximum they will go to is 95%. House - Lockup completed 23rd December 2011 - Painters are in!!! https://forum.homeone.com.au/viewtopic.php?f=31&t=37261&start=0&hilit=Blaxland Knockdown & Rebuild - Financials 4Oct 04, 2011 10:12 pm Buildingwest that is because you are more then likely borrowing with mortgage insurance. You can borrow up 90/95% with MI depending on your lender. To the OP - it is better for you to check with your lender. Any time you alter the security and therefore it's value you need the Bank's "permission". So to knock down the house will substantially affect it's vale in the short term (hopefully!) which will then (again hopefully) re-increase once the house is built. Worse case scenario will be that they will only lend you 80% value of the existing property as vacant land as well as 80% of the new build cost - this is not including if you require more funds and therefore will be at the mercy of your lender's Mortgage Insurance Co. Check with your lender / broker for exact confirmation as they all differ. Some things are worth waiting for. 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 13678 Hi We have finally decided to complete a KDR on our corner plot in NE Melbourne suburbs. Given its a corner plot approx. 400 sqm just a standard design may not fit the… 0 8568 multiple occ properties are always billed by trades at a premium, rarely per sqm for the lot. You either have trades you know whoe will do by sqm or youre going to get… 1 2231 |