Can you get a knock down rebuild loan with a low deposit?
What high LVR construction lending looks like
Above 80% the lender is exposed to a build that is not finished on a site where the old house has been removed. The lenders that accept this want to see a mainstream builder with a strong track record, a standard fixed price contract, genuine savings history or clear equity, no credit issues and comfortable serviceability with rent included. Investment purpose knock down rebuilds above 80% are harder again.
What it costs
LMI on a construction loan is based on the total approved amount at the peak, which includes the refinanced mortgage. On a $1,000,000 loan at 90% LVR the premium can be $20,000 to $30,000 depending on the insurer, capitalised into the loan so you pay interest on it for the life of the loan. Interest rates for high LVR construction loans are also typically higher than the lender's standard rate.
Ways to stay under 80%
Reduce the build scope, contribute cash from savings or a family gift, use a guarantor security if a parent has equity and the lender accepts it on construction, or wait until the existing mortgage is lower. A specialist will usually run all four against your numbers before recommending an LMI path, because the premium plus the higher rate over 30 years is significant money.
Not sure which lender fits your situation?
Get help with knock down rebuild finance
A knock down rebuild is a construction loan wrapped around an existing mortgage, so lender choice, valuation approach and progress payment handling matter more than the headline rate. We connect you with a finance specialist who handles knock down rebuild deals.
Property Finance Help connects users with finance professionals who can help review the finance pathway for the property, loan purpose and lender policy fit.
Property Finance Help is a lead generation service, not a lender, broker, or financial adviser. All information on this website is general in nature and does not take into account your personal objectives, financial situation, or needs. Consider seeking independent professional advice before making any financial decision.
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