Sometimes the options for renovation are too limited, or an existing property is too far gone to be salvaged, and so the only route forward is knocking it down and starting from scratch.
This is an appealing prospect for all sorts of reasons, with the main selling point being the opportunity to build your dream home, rather than having to adapt an older design.
The first obstacle to overcome when approaching a knockdown rebuild project is that of how you’ll finance all the work required, so here are some of the options to consider which could turn your dream into a reality.
Work out the costs involved
Before you can find a way to fund the demolition of an old home and the construction of a new one, you’ll need to know how much this will all cost. The demolition alone will cost thousands, so it pays to be realistic and informed from the start.
A good way to go about this is by working with a knockdown rebuild specialist, since the pros will be able to cost out every step of the process, from planning approval to materials and beyond. Only once you’ve got a budget to work with will you be able to begin looking into your finance options.
Look into construction loan
While a traditional mortgage is based on the purchasing of a property that already exists, a construction loan is an alternative package which caters to the needs of customers who intend to build a home with money supplied by the lender.
Another difference is that rather than getting all of the cash upfront, you’ll usually receive it in a staggered way, kicking in at the start of each stage of the construction. This means you won’t be lumbered with the need to pay interest on the full loan from day one.
This type of loan can be used to cover not only the expense of building a home, but also of purchasing the land on which it sits.
Bear in mind that demolition costs won’t be covered by construction loans, because this isn’t a valuable asset which the lender could recoup if you default on your repayments.
Speak with your current mortgage provider
If you don’t fancy going down the construction loan route, then you could find the cash to fund your knockdown rebuild project via the lender who is already responsible for your mortgage on your current home.
In this case, you’ll be refinancing against the value of your property and unlocking stored-up equity that’s accumulated over the years, then using this as the capital for building a new residence elsewhere.
This obviously comes with more risks, but has the benefit of allowing you to repay your refinancing package when you sell your current home, or to switch your mortgage over to your new property instead, depending on your preferences and circumstances.
Check for grants and subsidies
There may be financial incentives offered by the authorities in your region to encourage the knocking down of old, outdated premises and their replacement with shiny new homes in their place.
Obviously the grants and subsidies available will vary from place to place, and there are usually limitations and restrictions on eligibility. Basically, don’t expect to get support if you are planning to build a mega-mansion. If your project is a more modest domestic build, then discounts aren’t uncommon.
Don’t rush into any decisions
Most importantly, be sure that when deciding on how to finance your knockdown rebuild project, you aren’t being overly hasty.
Not every approach will be suited to everyone, and your circumstances will dictate the best route forward, so take your time and you’ll be fine.
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