Browse Forums Home Finance 1 May 05, 2009 8:38 pm We are planning to knock down our Canberra house and rebuild with a project builder. The existing house is mortgaged, and although we have good equity in it, our bank (NAB) would only base our equity on the land value alone. This pushed us into LMI territory. Another bank has given us pre-approval, based on what (we think) the newly constructed house and land will be worth, which means we can avoid mortgage insurance. Of course this won't be set in stone until we provide the bank with approved plans and a building contract, and they do a proper valuation. Is the NAB approach something new? They said if we knock down the old house then they only have the land as security. In the end we will just refinance with the bank that lends us the money, but I'm curious if anyone else has been affected by this. Ben (hoping) to build in North Canberra Re: Financing Knockdown Rebuild: not all banks the same 2May 06, 2009 1:15 pm Oh dear I am worried we may be in the same position as you! Its probably a very bad time to be borrowing though, in terms of the wider economy etc. We have a crappy fibro cottage on a block that we owe ~ $194k on and its worth probably about $250-300 now, purely land value. We want to demolish and build too, looking at spending about $200K max on a new home. I know that once completed it will be worth about $500k but whether the bank feels the same way... I was knocked back by several banks when I went to purchase the house in the first place. And I had to pay LMI But I got there eventually, if at first you don't succeed try try again! Maybe seeing some genuine savings from you over the next few months would help you avoid LMI? ~*~Moved in on the 16th April 2011~*~ Re: Financing Knockdown Rebuild: not all banks the same 3May 06, 2009 1:28 pm All Banks should treat it the same way but you will always need to provide tender and plans for them to value the property as an "at completion" value. If you have no plans or tender then they will value the land value x 80% minus your existing debt. This will leave you with the amount they can finance. They may go higher but it will be subject to LMI. If you have plans & tender they will value as a whole x 80% minus your existing debt. Again they can go higher depending on mortgage insurance. Unless you provide plans and tender they can only value on what they will see in front of them - ie a block of land. Some things are worth waiting for. Re: Financing Knockdown Rebuild: not all banks the same 4May 06, 2009 6:49 pm kyton All Banks should treat it the same way but you will always need to provide tender and plans for them to value the property as an "at completion" value. If you have no plans or tender then they will value the land value x 80% minus your existing debt. This will leave you with the amount they can finance. They may go higher but it will be subject to LMI. If you have plans & tender they will value as a whole x 80% minus your existing debt. Again they can go higher depending on mortgage insurance. Unless you provide plans and tender they can only value on what they will see in front of them - ie a block of land. Sorry kyton but what do you mean by tender? I am new to all of this... ~*~Moved in on the 16th April 2011~*~ Re: Financing Knockdown Rebuild: not all banks the same 5May 07, 2009 8:05 am Your tender is the pre-contract list of everything the builder is going to do for you. Some builders go straight to a contract (ours did) whereas others do a basic tender which includes everything except changes to minor items like upgrades etc. So it sets out what the home is constructed with / costing of all basic items / the builders details etc. As I said pretty much exactly like a contract but sometimes builders go to a tender process first to "weed out" people who don't go forward with building with them. Some things are worth waiting for. Re: Financing Knockdown Rebuild: not all banks the same 6May 07, 2009 12:00 pm kyton Your tender is the pre-contract list of everything the builder is going to do for you. Some builders go straight to a contract (ours did) whereas others do a basic tender which includes everything except changes to minor items like upgrades etc. So it sets out what the home is constructed with / costing of all basic items / the builders details etc. As I said pretty much exactly like a contract but sometimes builders go to a tender process first to "weed out" people who don't go forward with building with them. ok thanks ~*~Moved in on the 16th April 2011~*~ 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 13658 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 8550 multiple occ properties are always billed by trades at a premium, rarely per sqm for the lot. 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