Rebuilding a house - how does the mortgage financing work?

[subirg]

So here's the scenario. We are considering knocking down our house and rebuilding to make it the way we want it, and bigger. The question we need some help with is understanding how the mortgage would work. The situation is something like this (all numbers are fictitious but proportions are in the right ball park).

- Original property purchase price - £500k
- Current Mortgage - 50% LTV
- Estimated rebuild cost £300k
- Estimated value after rebuild - £1m

Some questions:

- Will existing lenders consider increasing the existing mortgage to cover the rebuild cost?
- How much £ do we need to save before the project becomes viable (i.e. if we have £250k equity (50% of current value) how much more do we need?
- What else do we need to consider (apart from where to live once the old house is a pile of shattered bricks and broken glass)?

Thanks all!

[surveyor]

I suspect your current lender would be rather upset by your plan to knock down their security.

I think you probably need to change to a loan designed for house construction. They used to be available, and I assume still exist.

[FlashmanChop]

personally, I dont think they would give you consent to do this. Bridging fiannce may be the answer, then remortgage onto a normal mortgage once done.

[anonymous-user]

Try someone like Buildstore - they'll be able to give you some advice over the phone about your options. As for where to live while the build is taking place, get a caravan. £5K and you can live like kings

[Muncher]

Try buildstore, but look at it from the lenders point of view. Once you've knocked it down their only security is the land value so at that point you are at 100% LTV or thereabouts and at that point you are requiring another 300k...

It's not impossible but most lenders won't do it.

[blueg33]

TBH it will be better to ask your lender than PH. Lenders seem to have different views on it.

If yoyu have a £500k property, the chances are that the plot is worth £250 , so the value is not far off the amount the lender needs for security even after you have demolished (as long as you have planning permission)

[Jer_1974]

Better going direct to the banks as Buildstore charge you a "introductory fee" once they have put you in touch with the bank. I went with the BOS when building my house who would finance 100% of the land value and 75% of the build. I also needed a 10% contingency of the build though. The arrangement fees are steep also, it's almost the same as paying stamp duty. This was two years ago so it may have changed.