Building on your lot question

[Anonymous]

We currently own an old house on a lot that we like with a low interest rate(~3%). We are evaluating options to either buy a new construction on the same street (same lot size, etc.) or build a new house on our lot. Given our low interest rate, is there a financial advantage to just rebuilding on our lot vs. selling our current house and buying new construction on the same street? Thanks a lot!

[Anonymous]

Will the rate stay the same if you build on your own lot?

Building on your lot would require moving twice, while building on a different lot - just once.

[Anonymous]

Do mortgages have a clause that prevent tearing down the h Ouse? I would think so given that they require you to have homeowners insurance. So unlikely you could keep the rate.
If you move out and rent the house out you could keep the rate.

[Anonymous]

Anonymous wrote:Do mortgages have a clause that prevent tearing down the h Ouse? I would think so given that they require you to have homeowners insurance. So unlikely you could keep the rate.
If you move out and rent the house out you could keep the rate.

Thank you!

[Anonymous]

You don't keep the rate. You get a construction loan that upon completion dumps you into an arm or a fixed rate. You need to look at how much equity you have in your existing house/land. Do the math on what it costs per square foot for the new construction down the street, then meet with a few builders to see what they would charge per square feet to tear your existing house down and build. There are advantages to both ways, it's more what you prefer. We bought an old house in a prime area, lived in it for a few years then tour down and built a custom home. It was a lot of work picking everything out, but it is 'our' home with all decisions made by DH and me.

[Anonymous]

Anonymous wrote:You don't keep the rate. You get a construction loan that upon completion dumps you into an arm or a fixed rate. You need to look at how much equity you have in your existing house/land. Do the math on what it costs per square foot for the new construction down the street, then meet with a few builders to see what they would charge per square feet to tear your existing house down and build. There are advantages to both ways, it's more what you prefer. We bought an old house in a prime area, lived in it for a few years then tour down and built a custom home. It was a lot of work picking everything out, but it is 'our' home with all decisions made by DH and me.

This, construction loans are probably double OP's rate right now so proceed with caution.

I'll also say this, it might be preferable to tear the old house down and rebuild. You won't get hit with the impact fees which depending on where you live can be $50K to $60K.