Owner builder finance

Steve says:

I want to build my own home and expect to save some $100,000 + based on pricing to date. I’m getting my owner builders licence and a family member is a builder but not licensed.

So far my finance inquiries have been negative. Lenders only want much higher priced fixed priced contracts. Can you direct me in respect to lenders who may finance an owner builder?

Yes, owner builder finance can be tricky. We featured an article in TOB 138 Dec 06/Jan 07, which provides some guidance on this matter. We have another article due in TOB 175 Feb/Mar 2013.

Most lenders used to offer owner builder finance – but with strict conditions and staged payments. However, some banks have recently changed their policy and will now only approve loans to ‘qualified’ owner builders (architects, tradespeople etc).

When or if they do provide finance, they put a number of conditions in place, and will usually only release funds on a staged basis, after a stage has been completed and can be inspected (at your expense, of course!).

If at all possible, the best way to do it is to get the loan on the land, and use you cash to build. In the past, many OB’s have made the mistake of buying the land with cash and then going to the banks for building finance. They are much happier to loan on a block of land, which has a tangible value, than an owner built home.

Feedback seems to indicated that credit unions and building societies are more open to being approached.

The article in TOB 138 explained how OB finance is structured. The majority of institutions will only look at lending you 60%, but there are those that will go to 80%. Payment is staged, with cash only provided at the end of each agreed stage i.e. not in advance.

Generally they are not too keen to take on a project that has already started, so you may struggle a little there. From what I have heard, once the build starts, you have very little chance of getting a mortgage (or insurance) as an owner builder. If you apply before the first work is done, there are still lots of hoops to jump through, but it is possible.

One comment

  1. Do you have any specific questions about obtain finance? Comment here or on the Facebook link to this blog, and we will try to get them answered in the coming article.

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