Can I borrow to rebuild a home?

2012-09-29 11:59

Letters from our readers this month highlight the need to understand the interest rate on your loan.

Make

sure you always understand exactly how much your debt is costing you,

not only your monthly repayments but how much you will pay over the

whole period of the loan.

It is also important to make informed decisions about whether or not to fix your interest rate

Motlatsi writes:
We have bought a house for R90?000, and we want to demolish and rebuild it from scratch into something better.

This means that we will need to borrow R300?000.

Is this possible?

Maya replies:
A bank will only extend a home loan up to the value of the property, so you need to take out a building loan.

Jeff Lawrence, head of affordable housing at Nedbank, says there is no issue in principle with buying a property that has a house on it, demolishing the house and then building a new house to the new owner’s specifications.

This building loan process has a number of requirements. A building contract should be in place, building plans must be approved and the house must be enrolled with the National Home Builder Registration Council.

Progress payments are made based on completed work.


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