Rebuilding house from ground up & paying for it?

The term you're looking for is construction loan or construction mortgage. Go discuss it with your bank.

dirtmover wrote: ↑ The term you're looking for is construction loan or construction mortgage. Go discuss it with your bank.

This is right, go talk to your bank. You will need to save every receipt for everything you are going to buy for the house.

Depending how your current mortgage is structured they will most likely request your current mortgage be discharged and they will then issue you a construction loan. When going about it this way be prepared to do everything by the book. Permits,inspectors etc. They may also raise the rate on you. I cant say for certain.

Usually what will happen is the bank will give you the funds you need to complete the project in draws. So they will give you money for foundation and framing. When that is done an inspector will come give it a pass or fail. If the work is good they will release another block of funds to get the rough in of the plumbing/electrical done. This will continue so on and so forth until the project is done.

They may do things differently with you but in my experience this is how its usually done.

Sylvestre wrote: ↑ I have a house in Toronto likely valued between 900K-1.3M. We bought it a while ago and we have ~350K left on the mortgage. We want to renovate/rebuild from scratch basically. For others that have done it, how does one typically pay for the rebuild? We can easily take out a HELOC as we have enough equity & our own money but I've also heard that once you demolish the old house, then technically there's no equity until the new one is built.
Can someone tell me what's the best thing to say when talking with the bank?

And I know someone will say "take Heloc, tear down and don't tell bank" - don't want to do that.

As mentioned, you are looking for a construction loan.

You can borrow up to 80% of the estimated value. Rate is Prime +1.00. 18 month term.

You must have cash on hand, as the funds are released only at certain stages. You can borrow up to 65% for the land value up front (to pay off your existing mortgage), then the rest of the loan is released at (very roughly):

1-Foundations are complete (15% complete)
2-House is weather protected (roof and walls up...) (40% complete)
3-Flooring, dry walls, exterior wall, furnace complete (65% complete)
4-Roughed in and fixtures complete (85% complete)

After it's 100% complete, you can roll the construction loan into a mortgage.

Do not tear down the house without contacting the current mortgage lender first. Because the home is the bank's security for your mortgage, doing anything that could decrease the value of that security is usually a violation of the terms and conditions of your mortgage and the bank will consider that you have defaulted on your mortgage.

Make an appointment to discuss your plans with the bank. Some banks do not offer construction financing. If yours don't, ask for a referral to a mortgage lender that does. Different mortgage lenders have different rules regarding construction financing in terms of what they will finance and the amounts and costs. Good Luck.

BTW: If you are referred to a mortgage broker, make sure that you find one that has lots of experience with this. This is not your typical mortgage and lots of things can go wrong so you need someone who has lots of experience with construction loans. Most brokers offer them, but very few have any experience with it.