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Preparing to knockdown your home and rebuild

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If you have a home in a great location, you might be looking at the option of demolition and rebuild. This can often an affordable option compared to doing an extensive renovation and can often be easier if you have an older house in poorly maintained condition as it replaces all of the 'hidden' aspects of the house including plumbing and wiring.  

Here are some tips when you are contemplating a demolition and rebuild. 

Prepare a build plan

You should first prepare a plan that includes all of the costs associated with the build, including demolition, rebuild and any costs associating with renting and moving to a different home following the demolition. This lets you do a proper comparison between the costs of renovation and a demolition and rebuild project and then establish how much money you might need to lend. This will mean talking with remodelling contractors, demolition teams and general contractors.

Chat to your mortgage provider

If you don't own your house outright, it's important to chat to your mortgage provider. They need to verify that you can demolish the house, which forms part of their security against your loan.You may also need to increase your mortgage limit to ensure that you have enough money to build the new house that you are planning. It can be worth preparing some information about the value of your land, such as information on the sale price of similar blocks, as that can demonstrate that the land alone provides enough security against your intended loan. 

Chat to your financial advisor

If you are looking to extend your mortgage to cover the cost of the new build, this can be a good time to review your overall financial position. Mortgage debt, as it is not tax deductible, is generally regarded as 'bad debt' whereas debt against investment assets, such as share portfolios or investment properties, is 'good debt' and is tax deductible. When you are looking at taking on extra debt or investing cash in accounts into your new home, you can also review your overall financial position and ratio of debt to assets as well as maximising the amount of good debt rather than bad debt. You should check the interest rate and fees that you are paying on any debt facilities that you hold to ensure that these are still competitive as well. Before you go ahead with anything, work with your financial advisor to make sure you can afford a new home.

You may be able to refinance or restructure a number of your facilities to minimise the amount of interest that you are paying and ensuring that your overall financial position is suitably structured to meet your long-term goals.