Offer your thoughts or opinion on the input financial query or topic using your financial background.

Construction loan for new house replacing existing mortgaged house?
So let's assume some values to better explain this.  For simplicity, all of these are in thousands: So in this example, you're going to destroy $250 in value, pay off the existing $150 loan and have to invest $300 in to build the new house and this example doesn't have enough equity to cover it.  You typically can't get a loan for much more than the (anticipated) property value. Basically, you need to get a construction loan to cover paying off the existing loan plus whatever you want to spend to pay for the new house minus whatever you're planning to contribute from savings.  This new loan will need to be for less than the new total market value.  The only way this will work out this way is if you bring significant cash to closing, or you owe less than the lot value on the current property. Note, that this is in effect a simplification.  You can spend less building a house than it's worth when you're done with it, etc., but this is the basic way it would work - or NOT work in most cases.