In case you missed it, we’re finally starting the knock down and rebuild of our forever home.
You’ve bought a home in the location you love, but you need more space, comfort or convenience and less asbestos and brown brick. You’re considering a knock down and rebuild.
You’re probably carrying some existing debt on the original house purchase and you’ll need to refinance to build your new home. For that we have gone with NAB, and I’ll tell you why we chose them in another post, because I am in love with a bank (-gag-).
Follow these steps to help refinance for your knock down and rebuild.
Get a valuation
You need to work with a bank that will value your home not on its current state but on what the property would be worth once the new home is built.
We found that the NAB would do this for us but some other funders may do the same.
Factor in your existing debts
It may be ugly but you may as well do it before the bank does.
Include everything from business debts, right through to credit cards and the balance of your existing mortgage – anything you are securing against this property.
The calculation is:
Future Valuation – 20%*- existing borrowings = $ left for your build
* Most banks will only loan up to 80% of the value.
Prepare for narky lenders
Of course, your existing financier won’t like the idea of you refinancing. Be prepared for them to make it quite difficult to get the form requesting the refinance.
For us, apparently the only possible way to get that form to us was to post it. Like in an envelope. With a stamp. Like your grandma does.
Your original broker may also resent you. Why? He has to repay a large commission he got on your original loan.
Prepare for your builder’s quote
When you finally get the go ahead on your refinance, be prepared for the fact that the figure you have to play with won’t match the builders quote. But they never do.
So your next step is to refine the scope of works for your forever home and do your best to get the best prices to match what the bank has offered.
What the NAB (bless their cotton socks) offered us was close enough to good enough and would enable us to get going. The nice but not necessaries’ are gone from the scope of works and the landscaping will mostly be DIY but we are moving ahead and that’s what matters.
Next find out how to finalise an affordable contract with your builder. Better dust up on my negotiating and assertiveness skills.