Please note - Due to the holiday season, builders and developers may be slower than usual in responding to any queries Close

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.

About

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.

You may also like

Jan 25, 2019

What is buying off the plan and is it right for you?

For investors and first home buyers, buying off the plan can present an exciting opport...
Read More
Oct 08, 2019

Downsizing In Comfort: Tips For Empty Nesters

Whether it’s embracing retirement or the rest of the family finally moving out of the h...
Read More
Jul 24, 2019

Learning The Language For First Time Buyers

When purchasing property, especially for the first-time buyers, it is easy to be overwh...
Read More
Nov 13, 2019

Stocking The Home For First-Time Buyers

That sense of relief you feel when you’ve finally overcome the massive hurdle of closin...
Read More
Nov 22, 2019

Budgeting Tips For First Home Buyers 

For the average-income earning Australian couple, it takes approximately five years to ...
Read More
Sep 17, 2017

5 Key Steps To Remember For Your Home Finance

It’s an exciting time when you decide to build your very own home, however, there is a ...
Read More
May 22, 2019

Homeownership: Achievable Dream or a Delusion?

The monumental decision to become a homeowner is a great milestone to achieve. Although...
Read More
Aug 22, 2019

Selling Your House? Here’s What To Expect

Buying property can be stressful, but so too can selling it. From the minute our home i...
Read More
Jul 28, 2017

First Home Buyer? Research These Crucial Decisions

Created by Step One Homes Building your first home is an exciting time. If it’s your fi...
Read More
Nov 06, 2019

First Home Buyers: Here’s How You Could Buy With Jus...

Following the federal election promises back in May, the Government has now provided mo...
Read More
Mar 29, 2017

Understanding Stamp Duty Concessions for Your New Build

Stamp duty is a tax that everyone buying assets, such as real estate, is required to pa...
Read More
Oct 30, 2019

Buying A Home? Plan Ahead For These Hidden Costs

It can be too easy to become swept up in the excitement of buying a property, that you ...
Read More
Jul 24, 2019

Smart Wealth Building with Home Equity 

While homeownership may seem to come hand-in-hand with a mountain of debt, establishing...
Read More
Oct 30, 2019

Getting A Pre-Approval Before Finding Your Dream Home

The journey from the borrower to a homeowner is an exciting yet daunting process that c...
Read More
Dec 10, 2019

How Much Can I Afford To Borrow For My Dream Home?

When thinking of buying a new home, especially for a first home buyer, it is crucial to...
Read More
Jul 23, 2019

10 Essential Questions To Ask Your Mortgage Broker

When you're in the market for a new mortgage, acquiring a home loan can be a complicate...
Read More
May 06, 2020

Victorian Government Extends First Home Owners Grant...

The Victorian State Government has announced that they will be extending the $20,000 Fi...
Read More
Nov 01, 2020

Think Like A Buyer When Selling Your Home

When selling your home, it is a good idea to take a step back and look at your home fro...
Read More
Aug 04, 2017

10 Wise Ways to Pay Off Your Mortgage Earlier

Owning your own home is an exciting time of your life. With all the possibilities and l...
Read More
May 06, 2020

Can I Still Sell My Home During the COVID-19 Pandemic?

With the current condition that the world is in, it is difficult to determine what is o...
Read More
Jul 25, 2018

How Much Does It Cost To Build a House: Creating A B...

The big question when it comes to building a new home is "how much does it cost to buil...
Read More
Nov 22, 2017

Why Should You Speak to a Mortgage Broker

Looking for a lender can be incredibly difficult, time-consuming, and confusing. That i...
Read More
Oct 24, 2018

Moving Interstate? Ask your removalist these 8 quest...

Piece by WridgWays.   When moving interstate you want to make sure you're fully pr...
Read More
Aug 03, 2017

Be Smart, Avoid Home Improvement Fails

When searching for ideas for a home renovation, you can get millions of results on the ...
Read More

Get more from

Browse New Home Designs