How to Finance Knock Down Rebuild
Financing a knock down rebuild is a smart way to turn your existing home into the dream home you’ve always wanted. If you’re in Australia, there are several options to fund your knockdown and rebuild project, from demolition costs to working with rebuild specialists.
But how can you manage your budget and ensure your knock down and rebuild home is successful?
For a complete guide on financing options and tips on every step of the knock down rebuild process, read more to learn how to achieve your new home that fits your budget.
Why Knock Down and Rebuild?
According to the report by the Australian Bureau of Statistics in 2022, knock-down rebuilds and small redevelopments make up about 25% of the housing and townhouse construction market in NSW.
So what is it, actually?
Knock down and rebuild involves demolishing your current home and constructing a new one on the same property. This allows homeowners to upgrade their home design without moving.
You may choose to rebuild your home to avoid costly renovation and design the perfect space with modern design features. Possible other reasons include:
- Personalised designs, such as floor plans, inclusions, and colour selections
- No need to move
- Boosts home value
- Saves on taxes
- Better utilise space
- Meets current building codes
- Easier than complex renovations
Working with a builder and obtaining planning approval from the local council, you can create your dream home while staying in a familiar area.
Knockdown and Rebuild: Pros and Cons
Pros
- New and Modern
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Starting fresh allows you to incorporate the latest designs, energy-efficient materials, and cutting-edge technologies for your house.
You can create the perfect home with open spaces, contemporary finishes, and the latest smart home features. - Starting from Scratch
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With a knockdown and rebuild, you start from the ground up, allowing you to design your home without limitations.
You can fully customise the layout, rooms, and style to suit your lifestyle rather than working around the constraints of an existing structure. - Increased Property Value
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A modern, newly built home is more attractive to potential buyers and generally commands a higher market price.
New homes are also more energy-efficient and require less maintenance, which appeals to future homeowners.
Cons
- Cost
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A knockdown and rebuild can be costly. You’ll need to budget for demolition, new construction, and possibly temporary accommodation during the build.
Unexpected issues like construction delays or design changes can raise costs. While the long-term benefits may outweigh the price, the initial expense is a significant hurdle. - The Expense of Living Somewhere Else
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One often overlooked cost of a knockdown and rebuild is the need for temporary accommodation for you and your furniture while your new home is being built.
Renting can be expensive; if the project faces delays, those expenses can quickly add up, both cost-wise and time-wise. - Zoning and Planning
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Local councils have specific rules about what can be built, and securing the necessary approvals can be time-consuming. Issues like height restrictions, heritage listings, or environmental protections can limit your design options.
You may need to work with professionals to navigate these requirements, which can add time and costs to the project.
How Much Does a Knockdown Rebuild Cost?
The knock down rebuild cost varies depending on the type of house and several other factors, such as the size, design, and materials chosen.
There is no set price, as it also includes costs for demolition, council approvals, and site conditions.
In general, prices can range from a few hundred thousand dollars to over a million.
It’s important to work with a builder who can provide a detailed estimate based on your specific needs and project scope to get a clear idea of your rebuild cost.
Financing Options for a Knockdown Rebuild
There are several financing options for your future knockdown rebuild. Check out these options.
- Subdividing Your Land
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Dividing the land allows you to sell a portion or develop it, potentially building a granny flat, for instance, for extra income. This strategy allows you to fund part of your brand new home while maximising the value of your property.
However, it's important to ensure that local zoning laws allow for subdivision. On top of that, proper communication with the lender is also needed. - Building and Construction Loan
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A building and construction loan is released in stages as your building process progresses, covering costs like demolition and construction.
Lenders release funds at key milestones, such as when the foundation or storey is completed, allowing you to manage expenses every step of the way.
Typically, you can borrow up to 95% with LMI.
You’ll only pay interest on the amount drawn down, making it a more affordable option while your home is being built.
This financing method can be an option for keeping your project on track financially from start to finish. - Equity Loan
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An equity loan lets you use the value of your existing property to finance your knockdown rebuild. If you’ve built up equity in your home, you can borrow against it to cover costs such as demolition and construction.
This option is flexible and convenient for homeowners who don’t want to take out a new loan. By leveraging your home’s equity, you can fund the building process and avoid unnecessary debt.
This loan type can be a cost-effective solution to building your home because it gives you control over your finances throughout the project.
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Frequently Asked Questions
It depends on your home’s condition and what you want to achieve. A knockdown rebuild offers full design freedom, while renovations may be more cost-effective but come with limitations due to the existing structure.
A construction loan is a common option for financing a knockdown rebuild, as it provides funds in stages as your project progresses.
Yes, but you may need to refinance or seek approval from your lender before proceeding with the rebuild.
Simplify Your Design, Maximize Your Savings
Simplifying your design can help you maximise savings in your knock down rebuild project. By working closely with knock down rebuild specialists, you can create a modern home tailored to your needs while keeping costs under control.
From financing options like construction and equity loans, there are many ways to make the process more affordable.
Ready to take the next step in building your dream home? Visit Professional Home Loans to explore how we can help you finance your knock down rebuild and make your vision a reality.
Testimonials
Tom has provided us with a very professional service, communicating all the available options to us and in the process he has literally saved us $75k that we would have otherwise paid. Being new the Australian property market it was imperative we found a broker that had the patience to answer the numerous questions we had be it by phone or email and sometimes outside normal working hours and that is exactly what we got from Tom. He certainly goes beyond the call of duty. Keep up the good work, Tom and we will no doubt be back in touch with you in the not too distant future.
Hamilton & Nyari
Finally, we were able to buy our own place in Sydney. THANKS to Michael. We were given the run around by various banks (we had a unique situation and despite good income and stable one, loan wasn't coming easy). When we almost finally gave up, we had nothing to lose and made one last call and it was to Michael. Our hopes were back in two days from there, and had our loan approved with in next few days. We appreciated all the prompt and helpful responses to all of our queries in relation to purchasing with a Temporary Visa. He even made a bank valuation possible in 24 hours or so. If we ever need help again with our finance, Michael will be the first person we would call. Kindest Regards, Anjuli & Kris
Anjuli & Kris Balachandran
Tom, rest assured, when we hear of any of our acquaintances in need of a mortgage you are the one I'll be referring them to. We are very happy to have been working with you, not only because the result is good, but even more since Lisa and I really appreciated your personal touch in our case, your always being available, even for emails late at night and always taking the time to answer our every question. Kind regards, Lisa & Bas
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