Mortgage Glossary: Calculating Rebuilding Cost

Calculating Rebuilding Cost

If you want to make sure you're paying for the correct amount for building insurance cover, you'll have to be prepared to calculate the rebuilding cost of your home in order to make sure you have the right amount of buildings insurance.

The cost of rebuilding the property will not be the same as the market value. Surveyors and insurers have some rules of thumb to help you work out what your property is actually worth - but to be absolutely sure you should get a surveyor's report. If you're buying a property, the lender's valuation report will also contain a rebuilding cost figure.

Broadly speaking to work out your rebuilding cost, you should know the building dimensions which can be calculated by multiplying the length and width of the property in feet by the number of storeys.

1. Calculate the ground floor area: ground floor area = Length x Width

2. Calculate the total floor area: total floor area = Ground floor area x Number of storeys

3. Calculate the total rebuilding cost: total rebuilding cost = Total floor area x Rebuilding cost per square foot.

The cost per square foot will vary depending on where in the U.K. you live.

Let's take an example of the building insurance rates of an imaginary insurer called "Morcambe & Wise Insurance Services". Based on their long experience of insuring homes in the U.K., they've set the following rates per square foot for semi-detached houses:

London/Channel Islands (1946-79) £77
London/Channel Islands (post 1979) £84
South East (1946-79) £67
South East (post 1979) £74
East Anglia (1946-79) £61
East Anglia (post 1979) £65
Rest of UK (1946-79) £59
Rest of UK (post 1979) £62

So, for example:

  • You live in Scotland (which counts as the rest of UK)
  • The Property is 30 years old (which means a rebuild cost per square foot of £59)
  • Your House is 30ft wide and 40ft long
  • It has 2 storeys.
  • 1. Ground floor area: 30 x 40 = 1200 square feet
    2. Total floor area: 1200 x 2 = 2400 square feet
    3. Rebuilding cost: 2400 x 59 = £141,600 (this is the amount of cover you would need for buildings insurance purposes).

    The above figures are only those used by "Morecambe & Wise Insurance Services" but they should provide you with a guide - now get some building insurance quotes.

    Get professional help from a qualified independent mortgage advisor and see how much you could save on your mortgage payments. There's no obligation, just plain good advice.

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