Considering a move in today’s fluctuating property market can be a daunting prospect, especially when you already reside in a neighbourhood you cherish. This is where a knockdown rebuild becomes an appealing alternative—but how do you navigate the financing, particularly if you’re still managing an existing mortgage?
If you’re contemplating transforming your current home into a modern masterpiece, here’s our guide to understanding the financial intricacies of a knockdown rebuild, and exploring the various funding options available to help you bring your vision to life.
How much does a knockdown rebuild cost?
Accurately estimating the cost of a knockdown rebuild is crucial in determining the amount you may need to borrow. The overall expense will vary depending on the new home design you choose. Additionally, demolition costs should be considered, which can fluctuate based on factors such as how easy the site is to access and the presence of materials like asbestos. The cost of constructing your new home will also depend on the design. At Ridgewater Homes, we offer a diverse range of designs, ensuring that you can achieve a stunning new home without exceeding your budget. Additionally, opting for a knockdown rebuild can be more cost-effective than purchasing a new home, as you can potentially bypass stamp duty.
Can You Undertake a Knockdown Rebuild with an Existing Mortgage?
Absolutely. Financing a knockdown rebuild while managing an existing mortgage is entirely possible with a strategic approach. Begin by obtaining an accurate valuation of your current property, as you may be able to borrow up to 95% of its value through a specialised building and construction loan.
Financing Options for Your Knockdown Rebuild
1. Building and Construction Loan
A building and construction loan is often the preferred method for financing a knockdown rebuild. This loan is structured to align with the construction phases, providing funds as you reach key milestones, such as the signing of the contract, the laying of the foundation, the completion of the frame, making the home lockable, completing the interior fit-out, and finalising the build.
2. Utilise Your Existing Equity
Even as you plan to demolish your current home, the land it occupies still holds significant value. Equity, the difference between your property’s market value and the amount you owe on your mortgage, can be leveraged to finance your knockdown rebuild. For instance, if your property is valued at $800,000, with the land alone worth $600,000, a lender might allow you to borrow up to 90% of the land’s value minus your outstanding mortgage balance. This approach could eliminate the need for an additional savings deposit.
3. Redraw on Your Existing Home Loan
If your current home loan includes a redraw facility, enabling you to access extra repayments you’ve made, these funds could be directed toward your knockdown rebuild. This option is particularly beneficial if you’ve made significant progress in paying off your existing mortgage and can be combined with other financing methods to support your project.
4. Refinance Your Home Loan
Refinancing your current mortgage is another viable option to fund your knockdown rebuild. Refinancing can offer more favourable terms and features, providing the flexibility needed to finance your new home construction while potentially lowering your overall interest costs.
Interested in learning more? Call us today on 1300 784 533 to learn more about the knockdown rebuild process with Ridgewater Homes.
