What is a knock-down rebuild?
A knock-down rebuild means demolishing the existing house on land you already own and building a new one. Because you already own the land, there is no new land purchase, so no stamp duty on buying land again. Many people choose this because they like the location, school catchment or street, but the old house no longer suits them.
How is the loan usually arranged?
Typically with a construction loan, for the same reason as land-and-build: once the house is demolished there is no finished property to hold as security, so funds are released in stages as the build progresses, and you pay interest only on what has been drawn.
What differs from land-and-build:
- Your existing home loan is usually dealt with at the same time. It is often folded into the new construction loan and restructured.
- The value the lender assesses is generally based on the land plus the expected value once complete, not just the value of the old house as it stands.
- The equity in your land can often cover part of the build cost.
The details depend on your current loan balance, land value and building budget.
The usual process
- Settle the budget and design. Work with a builder or designer to fix plans and price.
- Get approval. In NSW this generally means a development application (DA) through council or, where eligible, a complying development certificate (CDC). The time approval takes affects the whole schedule.
- Arrange the loan. Submit the building contract, plans and budget for the lender to assess.
- Demolish and build. Work then proceeds through the drawdown stages (slab, frame, lock-up, fit-out, completion).
Documents usually needed
- Title and loan details for the existing property
- A fixed-price building contract
- Approved plans and a construction budget
- The builder’s licence and insurance details
- Your own income, asset and liability documents
The exact list varies by lender.
Common pitfalls
- Forgetting where you will live. Once the house is demolished you need somewhere else. Rent, moving and storage costs should be in the budget from the start.
- Approval delays. Development application timing is uncertain, and rent and interest keep accumulating if it drags on.
- No buffer. Surprises at demolition, price rises and variations during the build are all common, so keep a cushion.
- Looking only at the builder’s quote. Payment milestones and the lender’s drawdown schedule need to line up, or you can hit a gap where a payment falls due before the loan is released.
Want to see how your own plan would work?
Read about our construction loan service or book a free consultation. Tell us about your land, existing loan and building budget and an advisor will line up the drawdowns. The assessment is free, with no fee if we cannot succeed. For the basics first, see how construction loans work.
This article is general information only and not personal financial, tax or legal advice. Approval processes, drawdown stages, document requirements and rates vary by location and lender; rely on the latest requirements from council, certifiers and your lender. Written October 2026.
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