Mortgage lenders and house rebuilding?

[W4NTED]

Any property/mortgage experts on here?

I have an idea. If i bought a house using a mortgage and wanted to later (say 4-6 months later) knock it down and rebuild it (assuming I gain planning permission to do this) in to a much bigger and substantial residential home how would the mortgage lenders react to this? I have enough cash to enable me to rebuild a home and it seems a very good idea to make some serious money.

I have seen people in my area buy houses for £650k demolish and rebuild and sell for around £1.2m!

Would I need to settle the mortgage before the house is demolised or would they be happy to continue the mortgage based on the drawings and plans of the rebuilt house?

Any ideas guys?

[Trevelyan]

I'm no expert on this, but I'd guess that the mortgage company would only be interested that the value of the property remains more than the amount you owe them in case you don't pay them back (or to put it another way they wouldn't be happy if you deliberately went into negative equity).

If the value of the plot by itself was higher than the outstanding loan even without a house stood on it I can't see them being too concerned. Otherwise I'd have thought they'd insist that you pay off a fair chunk of the mortgage before devaluing (even temporarily) the asset which you've effectively used to guarantee their loan to you.

[Grandad Gaz]

W4NTED said:

.....Would I need to settle the mortgage before the house is demolised or would they be happy to continue the mortgage based on the drawings and plans of the rebuilt house?

You will need a property valuation based on the proposed plans and of course, build costs.

If the figures all stack up, then I can't see them objecting.

Edited by Grandad Gaz on Thursday 8th April 14:59

[FlashmanChop]

perhaps remortgage onto a self build type mortgage.

so your saying they buy houses for £650, demolish, and spend another £400-500k building another, to sell at £1.2m, to make relatively little money.

Surrey perhaps ?

[anonymous-user]

Your issue is getting the finance. They are happy to lend on an asset they could sell but the minute you knock down the property you are taking away value until a new house is there.

Even property developers are struggling to get finance so I'd say unless you have loads of cash to do the build you may struggle too.

[monthefish]

garyhun said:

Your issue is getting the finance. They are happy to lend on an asset they could sell but the minute you knock down the property you are taking away value until a new house is there.

Even property developers are struggling to get finance so I'd say unless you have loads of cash to do the build you may struggle too.

^^^This.

I doubt they would be willing to lend more than a %age of the minimum value the house/land will have at any stage in the project (i.e. if the land alone is worth £300k, they may be willing to lend a %age of that figure) as they would be putting themselves at risk if the borrower defaults.

Look into a build/stage release mortgage.