Demolishing home to rebuild - tell bank or not?

amd

Instead of adding a large extension to our old, problematic home our architect has advised us to knock it down and rebuild from scratch. It'll be cheaper (no VAT) and warmer with lots of space and everything we want!

Now we have got over the shock and are getting our heads around this, we keep coming up with various questions like... should we tell our bank or keep paying the mortgage and say nothing? We will probably manage the new build with our savings and not need to extend the mortgage - have been saving like demented things for 6 years to save up for the extension!

Might have problems remortgaging as my husband is on fixed contracts, interspersed with self employment! If we say nothing who'll know? The plot is worth more than the mortgage anyway as things go. Should we risk it?

Tim_L

You don't own your house while it's mortgaged: it is held as security for your loan. You're obliged to discuss this with your bank.

Skint_Catt

Unfort, I just wouldn't risk it - what would you do if you were 'caught out'?

From someone who can't even afford a roof over my head I wouldn't do anything to risk it if I had one!

S_C

MORPH3US

As above, would def. talk to your bank about this. Despite what you say about the land being worth more than the mortgage, demolishing the house without telling them will be a breach of the T&C's of the mortgage. That then gives them the right to "call in" the loan which obviously you don't need.

M

amd

While I agree with everything you have all said, I can't help but feel it would just involve them taking more money from us in arrangement fees or something of the like, to what end?

Having paid mortgage payments for the last 20-odd years to various lenders without anyone ever having come near us to check what was going on, it's sorely tempting. It's not like we're going to hang about putting up the new house - it'll be down one day, and foundations laid the next!

How on earth would they find out? (Famous last words......!)

Off to read my T & C's.

Bossyboots

amd wrote:

It's not like we're going to hang about putting up the new house - it'll be down one day, and foundations laid the next!

Strike a light you have such faith in builders!!!

I doubt it will be down in one day (having spent several working hours watching a demolition behind our office), the foundations need to set, the builders need their tea breaks and it might rain. Materials won't be delivered on time and the whole thing could go pear shaped in the middle.

I agree with the others who have said you must inform your bank.

You say how will they find out? What if you run into financial difficulties halfway through? You don't know what is around the corner. What if you default on your mortgage because of it. I don't think the mortgagee will be too happy when they try to re-possess your house to find only half of it there.

You should take the view that anything that can go wrong, will go wrong. This is too big a risk to take. I really can't see the bank having a problem with it if the land covers the security but it is for them to assess the level of risk they want to take, not you.

Fifer

Building projects are notorious for their scope to go awry. What happens if your builder goes bust half way through the project? I'd be too worried that the bank would find out and foreclose on the mortgage due to your breach of the T&C's to contemplate the route you suggest. Five people have responded now and no-one thinks this is a good idea. That might just qualify as a trend ...

I'd speak to the bank. Perhaps if you can assure them that at no point during the project will the value of your security be less than the outstanding mortgage, they might just treat it as they would an extension project. This assumes that the value of the plot less the cost of clearing it after demolition (probably the lowest value point) is greater than your outstanding mortgage. You may need some sort of survey to convince them.

amd

Thanks for all the replies. Maybe I'm taking this money saving a bit too far!

OK OK you're all probably right (from a legal aspect too) I should tell my bank. But why do I have such a strong feeling that it'll just cost me lots of money for no good reason!

AMD
PS. Hope you all turn out to be wrong about the builders!

greenwich

Yes, the bank will probably charge you for approval. But if you don't tell them and they find out, they will set their lawyers on you and guess who pays for that? You do, because your mortgage contract makes you liable for all their legal costs.

deemy2004

If your going to do the rebuild then do it properly, by ensuring that you have approval from your mortgage company.

Anything else, and your asking for trouble ! REAL nightmare scenerio's !

All because you thought you could save a few hundred pounds at the start.

Ian_W

AMD,
Just a further point, not touched on by the other posters, but still cautionary.
You will I imagine need Planning P. It's a publicly open process, your neighbours will receive letters asking if they have objections, many places it's published in the local press , council websites etc. So it's not as if there isn't considerably scope for your lender to find out.
It's not as if - it's here to-day, gone to-morrow, replaced on Thursday!!