Does the lender value the land or the finished house for a knock down rebuild?
What the valuer needs
A valuation cannot be ordered on a rough sketch. The valuer needs council-approved or near-final plans, the specification list with inclusions, the signed or near-signed fixed price contract, and site details. They compare the finished home to recent sales of similar new or near-new homes in the same area. If there are no comparable new homes nearby, valuers become conservative.
Why the valuation can come in under cost
The valuer's job is to say what the house would sell for, not what it costs to build. High-end inclusions, custom architecture, pools and landscaping typically cost more than they add. A $900,000 build on a $700,000 block is $1,600,000 of cost; if the suburb ceiling for new homes is $1,450,000, the valuation lands there and the loan is sized on $1,450,000. You fund the $150,000 gap.
This is why specialists ask for the plans and contract before the loan application goes anywhere. A desktop opinion early can save you from committing to a build the lender will not fully fund.
The land value after demolition
Some lenders also report the land value with the house removed, because that is the lender's security in the weeks between demolition and frame stage. If the existing mortgage is high relative to the bare land value, the lender may require you to reduce it or fund the demolition and early stages yourself before the loan settles.
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.
Tell us about your property finance goal
Share a few details and we can help identify a suitable next step for your situation.
Tell us what you need and we'll match you with a broker who will contact you directly. Free, no obligation.
Your details are used to assess your enquiry
Ready to get finance help?
Tell us your situation using the form above and a finance specialist will contact you.
