How do you finance a knockdown rebuild?

The first thing I would confirm is when the lender will approve the whole project. Once the existing house is demolished, the property supporting the loan changes. You need to know what happens to the current mortgage and where the building money will come from before that happens.

Get the finance, planning and building requirements clear while you still have the option to change the plan.

Loan approval, permission to demolish and readiness to release the first construction payment are separate things to confirm. Ask for the sequence in writing rather than relying on a general pre-approval or a conversation about how much you might borrow.

The debt does not disappear when the building does. The current mortgage needs to be included in the construction plan, whether it stays with the existing lender or is refinanced as part of the arrangement.

I would first check the current loan balance, any fixed-rate commitments and what property secures the debt. If another property is linked to the loan, that needs to be considered before changing the arrangement.

Then we can compare the existing lender with alternatives that accept the project. A lower advertised rate is not enough if the lender cannot support the demolition sequence or the type of build.

ANZ's construction handbook illustrates how lender-specific this can be: it explains options for an existing ANZ land loan and says a land loan held elsewhere needs to be refinanced to ANZ. Check the arrangement that applies to your own property and loan.

Possibly. A lender may consider demolition within the overall funding where its criteria are met, but you need to confirm when that money becomes available.

If the demolition contractor must be paid before the lender releases the relevant funds, you need cash to cover that timing gap. Do not assume an amount included in the total loan can be drawn before construction begins.

Ask for the demolition quote, payment dates, disconnection costs and lender requirements to be checked together. The same applies to design fees and deposits paid before the first construction draw.

There can be 3 different values in the discussion. They answer different questions.

The finished value is not automatically today's property value plus demolition and building costs. Money spent removing a house or preparing the site does not necessarily add the same amount to market value.

If the accepted value is lower than expected, the loan may require more cash or a smaller project. Check that before demolition leaves you committed to completing a build.

Equity in the land may support the loan, but it does not remove every cash requirement. The lender also checks current debt, the total loan and your ability to repay it.

You may need money for early costs, the agreed contribution and items the loan will not fund. The home equity guide explains the difference between equity and money you can actually borrow.

Start with the current mortgage or purchase cost, then add all the work and costs needed to get into the finished home.

Include demolition and site clearing, the building contract, design and engineering, approvals, service connections and any retaining or drainage work outside the contract. Check separately for driveways, fencing, landscaping, window coverings and appliances.

Rent, storage and moving are household costs, even when the bank does not include them in the construction amount. Keep them visible in the plan.

In this planning example, a proposed $950k total loan and $100k available cash provide $1.05m. That leaves a $55k gap.

The property valuation might support the proposed loan, but that alone does not fill the gap. The budget needs more available money, a lower agreed cost or a different plan before work begins.

This hypothetical planning illustration does not describe a real client or assess eligibility for a loan. It does not include every possible cost, and the reserve needs to match the actual project.

Write down the existing mortgage or purchase cost, demolition, building contract, outside costs and cash you want to keep for rent and contingencies. Compare that total with the proposed total loan and available cash.

Treat the result as a way to find a missing amount. It does not assess borrowing capacity, the lender's valuation or whether funds will be released in time for a particular invoice.

Once the project is funded overall, map the payments. Your lender may require the agreed cash contribution before the first construction payment, so having enough money in total does not necessarily mean it is available in the right account at the right time.

Check the household budget across the whole construction period. You may have rent to pay while interest on the progressively drawn loan increases.

I would look at 3 periods: the time after moving out but before construction begins, the build itself, and the full home loan repayment after completion. If an existing loan remains separate, include its repayments too.

For an interest-only construction arrangement, paying interest does not reduce the principal. The repayment can change again when the loan moves to principal and interest. Use the mortgage repayment calculator to compare the completed loan at the term and rate you are considering.

For example, at $700 a week, 4 extra weeks of rent would cost another $2,800 before storage, moving or extra construction interest. Use the actual weekly rent in your budget, then test a longer delay as well.

Ask what happens if the delay is longer. Check the lease, loan commencement and completion deadlines, and the builder's latest schedule. A delay may change both your living costs and the lender's requirements.

If a delay puts repayments at risk, contact the lender early. Changing repayments and borrowing more to complete the build are separate decisions.

Confirm planning permission, demolition requirements and building approvals with the relevant professionals. Finance approval does not give permission to demolish a protected property.

In Brisbane, heritage and character controls are different and can affect what you can remove or change. Check the property through Brisbane City Council's heritage and character guidance and obtain project-specific planning advice.

Have the demolition quote checked for the work it includes. Ask about service disconnections, waste removal and any asbestos requirements. Confirm insurance for the demolition and building periods with the relevant insurers and the lender.

Before authorising work, I would want these questions answered:

If something changes after approval, tell the broker and lender before relying on the old figures. A new price, builder or design can change the assessment.