If you love your current location but not your old house, you might be considering a knock down rebuild in Melbourne. A knock down rebuild is a process where you demolish your existing home and build a new one on the same block of land. This way, you can enjoy the benefits of a modern, spacious and energy-efficient home without having to move away from your neighbourhood, schools, friends and amenities.
What are the steps involved, and what challenges might you face?
There are numerous reasons why you might want to demolish your old house and construct a new one. Here are a few examples:
A knock down rebuild is a major project that requires careful planning and preparation. Here are some of the key steps you need to take before you start:
If your loan has a redraw facility, you can use any extra payments you’ve made to help finance your knockdown rebuild. You can accumulate savings that you can use to pay for the costs of building a new home by making additional loan payments. Keep in mind that it might take some time to accumulate sufficient savings to pay for the entire cost of the rebuild.
Use the equity in your current home.
Your equity is essentially how much of your home you own – or the difference between the value of your home and the amount you owe on your mortgage.
A lender will often allow you to use some of this equity to finance your build, though they may require you to leave a 20% buffer. However, with LMI, this can be as low as 5%.
For example, if your existing home is worth $800,000 and you owe $200,000, a lender may allow you to borrow $440,000 for a knockdown rebuild. With LMI, they may even allow you to borrow more.
The benefit of taking this approach is that you have more leeway in paying for the construction project as it progresses. The disadvantage is that, unlike a construction loan, you will typically be paying interest from the time you take out the increased loan.
You could ask your current lender to increase your home loan if you choose to borrow more against your home in this manner. However, with interest rates at historic lows and increased lender competition, a knockdown rebuild may be the ideal time to compare mortgage rates and refinance your home loan.
In either case, you’ll have to go through the entire loan application process again, which includes meeting the bank’s lending criteria.
Some houses have simply run their course and lived their best lives. In some cases, you can pour your hard-earned money into a tired, old property for years and never get the dream home you envisioned.
The condition of your home is important. How much work will be required? A simple touch-up is frequently insufficient, and you will need to invest significantly to bring it up to a high standard. Large structural changes will result in very large bills, which will frequently exceed the cost of building a new property from scratch.
Remember that a new home will be exactly that: brand-new. Even after major renovations, you will need to perform ongoing maintenance on your older property, which means additional costs. And, in terms of return on investment, the renovations required frequently outweigh the additional value added to the property in the first place. Building a new home is likely to be more valuable.
J.A.O Constructions Pty Ltd are the experts in knock down rebuilds in Melbourne’s suburbs and are able to manage all aspects of the project from start to finish. Here are some of the benefits of working with us:
First and foremost, our Melbourne knock down rebuild specialists will conduct a site inspection and sit down with you to discuss the best options. If renovations are feasible, we are more than capable and happy to assist. But, if starting from scratch is the best option for you, we will be upfront about it so you get the most bang for your buck.
After surveying the site and understanding the local planning controls, our partner building designers or architects can make a recommendation based on your design brief, which we will have put together in collaboration with you.
J.A.O Constructions Pty Ltd will then help you understand the process in any rebuilding requirements and can even arrange a demolition quote from our trusted partners. We also provide a free project briefing to help you better understand your options and ensure you get the dream home you’ve always wanted.