I currently have a house with an existing mortgage of $400k left. I’m considering demolishing the house and rebuilding a new one that will cost $750k. I understand that I will have to pay interest-only on the construction loan for 12 months. Once the house is built, what will my total mortgage amount be? Will it be the $400k left on the current mortgage plus the $750k for the new house, totaling $1.15 million? Or will it just be the $750k, since the old house will no longer exist? Please advise.
It’s not that simple. You won’t be able to mortgage $1.15 million ($750k for the construction plus the $400k on your existing mortgage) unless the home appraises for that value.
Brady said:
It’s not that simple. You won’t be able to mortgage $1.15 million ($750k for the construction plus the $400k on your existing mortgage) unless the home appraises for that value.
Better make sure that lot is very expensive.
@Hale
You never know, the lot could be pricey, but OP will likely need to bring some extra money to pay down or pay off the $400k mortgage.
If you need the full $750k for the renovation, then your total mortgage would be $1.15 million—$750k for the renovation plus the $400k mortgage. However, if you’re using the $750k to pay off the $400k mortgage and still have $350k left for the construction, then your total mortgage will be $750k. Does that make sense?
If you owe $400k, you might want to reconsider tearing the house down. Maybe sell it and buy a plot of land instead.
You owe $400k. The total mortgage for the new house will be the cost of the construction plus the $400k, unless you bring additional money to the table.