Hi all, got a quick question.
I just bought a block of land and borrowed against my current home. We currently applying for a construction loan again and using equity against our current house and waiting for an approval. We are thinking of selling our current house are we allowed to once the construction loan has been approved?
Pretty sure this is the case but the decisions are made on a case by case basis as well depending on your personal financial situation
In most instances I would image the proceeds from your sale would have to pay off the borrowing in your place sold
you can sell your current home whenever you want
Honestly if you're thinking of selling your current home before the new construction is completed you'd be better off re-applying for construction loan using the unencumbered land as the security. When you sell your current home you'll need to pay off any debt against it, including the funds used to buy the land. As it's a building loan you need now you likely won't be able to substitute security as it will be far too messy with progress payments etc.
When you purchased the land using the equity in your existing home did the bank take a mortgage over the vacant land as well as your home? If so then the Bank will do a partial release when your house is sold and they receive enough funds to maintain the approved equity over the land and construction costs.
You could swap the security from your house to the combined new build and land calculated on total of the completed construction + land value up to the LVR.
Talk to your bank and let them know what you want to do and ask for the cost of fees to do so.
I think you can but you will have to immediately pay off any mortgages/borrowings against the house you sell.