I purchased a site with an old existing house. The value was mostly in the lot as the house was 30 years old and of lesser quality. I obtained a 60% loan to value on the property. Now I plan on tearing down the house and building a significantly more expensive home. I don't need another construction loan as I'm paying cash for the new house. In essence I just obtained the mortgage to finance a portion of the lot for personal reasons. The question is , do I need to notify the bank at all ? The house will be complete in about a year and a half and the value of the property will be >3X the original purchase price.

  • 2
    Here's a hint about the lender's attitude on a tear-down: did they insist on fire insurance on the mortgaged property?
    – DJohnM
    Jan 17, 2017 at 22:48

1 Answer 1


You would probably be best off checking through your loan documents to see if anything is listed in it in regards to tearing down the existing house. Likely it is not allowed.

Thinking about it logically, the house is collateral for the mortgage, and you are wanting to destroy the collateral. I would expect the bank would not be pleased.

Semi related question (answers have some good info) - Construction loan for new house replacing existing mortgaged house?

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