Can You Demolish A House If It Has A Mortgage?

If you are wanting to rebuild your home from scratch, there is a high chance that you are thinking about demolishing your house in Dubbo, Wellington or the surrounding areas.

This will give you a completely blank slate to work with which can hold many benefits, such as offering you the land you need without the stress of looking for a free plot elsewhere and giving you complete freedom to build the house of your dreams. 

However, it’s not quite as simple as this. As well as all of the costs involved, you may be concerned about what happens if the house you intend to demolish has a mortgage.

Here at Boland Contracting, we often get asked “can you demolish a house if it has a mortgage?”.

In this handy guide, we will answer this frequently asked question and provide all of the information you need to know if you want to demolish a house with a mortgage.

The simple and straight answer to this question is no, you are not legally allowed to demolish a property if there is a mortgage on it. This is because the physical building is used as collateral by the lender, often a bank, under a mortgage agreement.

This means that if you don’t pay your mortgage repayments within an agreed timescale, they could repossess the house so that they still get money back from the loan that they gave to you when you purchased the property. If the house is not there, this is not possible, putting them in a disadvantaged position.

As a result, demolishing a house when you have not paid off the mortgage repayments is not legal and would be in breach of the mortgage contract you signed when you entered an agreement with the lender. It will state that you have to keep the house intact while under the contract.

Even if you intend to rebuild a house on the same plot of land with your own money following a demolition, you are still not legally permitted to go ahead with the demolition. This is because the mortgage contract is specific to the property that you bought when you entered the agreement.

We will not carry out demolition on a property with a mortgage. If you do demolish a house with a mortgage, you will land yourself with severe legal problems and a costly problem.

However, luckily, there are other things you can do.

If you want to demolish a house with a mortgage, organise a meeting with your lender and discuss what you want to do. They will talk you through your legal options and provide advice for your circumstances.

The most common solution is that you pay your current mortgage off in full and then gain a construction mortgage from the same lender.

This will mean that you can do whatever you like with the property as it is now completely under your ownership, while the new mortgage grants you the funds you need towards building a new property.

When you have spoken with your lender, contact Boland Contracting who can help you to gain permission to demolish your home and carry out the demolition process in a stress-free manner.

Call us today on 0427 452 453 to find out how we can help you.