No Land for Sale Near You? Here’s how to Finance a Knockdown Rebuild.

Finding vacant land for sale in Melbourne is near impossible. And if you have your heart set on a specific location, and also want the luxury of a carefully-selected, brand new home design – a knockdown rebuild is likely your best option.

While building a house is not always the most straight-forward process to begin with (check out our handy home building guide), the process of organising a knockdown rebuild can be even more complex and confusing. If you’re looking for an overview on the knockdown rebuild process, you may want to check out the key steps to approaching a knockdown rebuild. In this blog we’re here specifically to talk about financing for knockdown rebuild, which can be quite different from buying land or a house and land package.

If you already own the land with the house you intend to demolish, then here are the steps to follow to secure your financing.

Remember, before you set down the path to securing financing, you’ll need to have negotiated council permits, selected your preferred home design, and elected a builder.

The most common way to finance a knock-down rebuild project is a construction loan. A construction loan is quite similar to a home equity loan, except that the lender will not release the full amount upfront, instead funding the project in stages as it progresses.

Another alternative is refinancing. If you’re carrying some existing debt from when you initially purchased the land, you’ll have to refinance to build your new home.

1. Get a valuation for your house and land

With either option, your first step will be to get a valuation of your property.

You’ll have to work with your preferred bank to secure a valuation of your property. For a construction loan, your valuation will be based on the value of your land, minus the cost of knocking down the existing house. You can expect to borrow up to 90% of the land value on your own or borrow up to 95% of the property value if you are working with a reputable, licensed builder.

When refinancing however, your property’s valuation will be based not on its current value, but the value it will hold once your new house has been built.

2. Factor in your existing debts

While this may be a tough reality check, it’s important that you know what you’re getting into (and the bank will do this anyway at some point). Consider credit card debt, the mortgage on the existing property, and even any business debts.

When refinancing, use your valuation to calculate the following:

Budget available for your build = Future Valuation – 20%* – Existing Borrowings

*This is because most banks won’t lend more than 80% of the total value

3. Expect the unexpected

It’s very rare that your builder’s quote will line up exactly with allocated budget based on the property’s valuation, especially when you start considering upgrades to your design and any other unexpected costs along the way. That’s why it’s important to work with the right builder who will support you throughout the journey, and be honest and upfront about the total cost – rather than springing a surprise on you down the line.

4. Ask us for help (as early in the process as possible!)

We are here to help. iBuildNew compares home designs from most of Australia’s leading and trusted home builders managing several hundreds – even thousands – of homes each year. We are not builders ourselves, so our interest is in providing you with the best information possible to help you make the best decision for you. We can help you along the whole process of a knockdown rebuild, and find you the right people to get in touch with to make your building journey easier.

There are many things to consider during a knockdown rebuild, we share pros and cons of this approach.

Having trouble understanding how to finance? Download our FREE guide today to get a comprehensive overview of what you should expect and prepare for.

Speak to one of our expert building consultants today. Call us on 1800 184 284 or book a call online at a time that suits you.

Zoe Langenberg

Zoe is passionate about coffee and interior design. You can find her most weekends exploring an art gallery or devouring a good book.


iBuildNew is the market leading aggregator dedicated to residential home construction and land development. As an independent platform, iBuildNew helps Australians identify and compare new home designs, house and land packages and land estates. It’s the smart way home buyers, who are considering a new build, can find the ideal options to match their individual needs. Home building is a big decision, we make sure you get it right.

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