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).
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.
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.