Either you do this all cash, or you do this how the Bank wants it to happen. With a professional. The bank has to have assurance that the project will actually be completed, and to a standard. Something that doesn't always happen with DIY, unless the owner is a contractor.

Put yourselves in the bank's shoes. This will help you understand what a realistic deal will look like.

I have a construction loan and we are our own GC. It an be done - but you have to provide assurances that 1) you are reasonably competent and 2) you have access to the right professionals. In our case, we hired a licensed GC as our site superintendent - but he's not responsible for the overall build. However, he's there to manage all the subs and be on site, etc.

It was NOT easy. It took a few phone calls and presentations to the bank executives.

Jan, sounds like you have a good situation. Our son hired a general and to do an addition and the sub that did the kitchen did a very poor job. Installed an apron sink on an island with no overlap - totally wrong install. General and kitchen sub did not make good for there mistake - one blamed the other for the problem and our got stuck with a mess.

If we could put together a situation like yours with a bank it would be perfect. Ive renovated several homes as flippers over the years and am now retired so I would have time to run the job. I'd like to know more about how you structured your situation.

Basically , we had to make the bank comfortable that we could manage a large amount of cash, and that we had access to folks who were going to help us. We also needed to show the research that we had done that showed we had a handle on costs so that we could bring this to completion. We also had to have larger than normal contingency, and frankly - show that we could pay for the whole thing if we needed to.

Here are my uneducated thoughts. No such thing as a land equity loan. Pretty much sums it up.

What is so bad about a construction loan? I've been quoted 4-5%.

Look at small local banks - that understand the market. BofA is not going to help you.

It is possible to get a construction loan as your own GC, we did it. Find a locally owned bank, they were much more willing to work with us.

I think this is the option I'm going to pursue.

Read your loan documents. I'm currently signing paperwork for a mortgage on a commercial building, and it says I have to notify the bank in advance of making any modifications or improvements. So I'm not sure you could pull off a teardown/rebuild using your existing LOC and without telling the bank.

Contact your existing lender about your plans. Chances are that if you are doing a teardown, and they are not financing the final home, they will require full payment immediately on teardown.

This is a classic example of when an architect can be your best friend. If you hire a good architect, one who charges between 7% and 15% of the construction cost, he will most likely include "Construction Observation" services. (And probably design a really nice cost efficient house for you as well.) This is a standard service where the architect continually visits the contractors and the job site to help insure the work is done accurately and with craftsmanship. He works for the owner and is the owner's expert. Therefore he only has the owner's goals in mind, not the contractor's, not the bank's. Beware, most people that think they can build a house since they've done a couple of remodelings find themselves way in over their head when trying to build a house. General contracting is much more complex than most people realize. In any event, I hope this helps. Best of luck with your project.

The best advice- have some sort of pro on your side. Permits can get very, very hairy, and a good architect can provide those services, a bit of construction management, as well as any/all local ordinances you need to adhere to. See above for all you will deal with, and then understand that it's a lot more than that.

Financing? Talk to your bank, but it has costs you can't avoid. Remember- even in a scenario that is a construction-to-permanent financing, you'll be paying monthly interest. Doesn't matter which way you go, just a fact, if you don't pay cash.

One last thing- YES. If you go to a bank for tear-down, build up, they will be acutely aware of it all. Be prepared to justify every single expense. Be prepared to do a line-item budge like a pro. They'll ask for it, and expect it.