Owner builder mortgage
If you are building your own home, then you may encounter difficulty funding your project through a bank.
Owner builder construction loans are available from a few select lenders if you have equity in your land, savings, or a guarantor that is willing to provide additional security for your mortgage.
However, if you are looking to apply for a construction loan, we can help!
How much can you borrow?
- 80% of the project cost: You must have available 20% of the cost of construction as cash, equity in another property or a gift from your parents just in case you go over your budget. You must also provide quotes for all items / work that will be completed prior to your mortgage being approved.
- 75% of the project cost: This is possible if you are a licensed builder building a property for yourself. No quotes are required however you must complete an accurate budget or cost estimate for your project.
- 60% of the project cost: You can borrow this amount even if you are not a licensed builder. No quotes are required however you must complete an accurate budget or cost estimate for your project.
There are also some different types of loans available for borrowers with specific needs:
- Kit homes: Our lenders can finance these as per the above guidelines. However you must have either equity in your property or savings available so that you can finance the purchase of the kit upfront. This is because from a bank’s point of view the kit is not adding value to the land at the time it is purchased.
- Low doc: Refer to the section below on low doc loans.
- Owner builder development loans: Refer to the below section on on small developments.
Discounts: Competitive professional package and basic loan discounts are available in some cases.
Do you qualify for a loan?
Apply for Owner Builder Finance
Our mortgage brokers understand the process of building a new home! We know which banks can approve your loan application and offer you a competitive interest rate.
- Choose from four competitive lenders that accept owner builder home loans.
- Our mortgage brokers can help you organise your cost estimate for the bank.
- Avoid delays and headaches, work with the experts!
If you would like our help to finance your project, then please call us on 1300 889 743 or enquire online and one of our mortgage brokers will call you to discuss the amount you need to build your home.
Low doc owner builder loans
Licensed builders completing a small development of their own
We can help you finance a project of up to four dwellings, with a maximum loan amount of $1,500,000. You will not need to provide any evidence of your income.
You can borrow up to the lesser of 70% of the Gross Realisation Value (GRV) or 80% of the hard costs (value of land plus cost of construction only).
If you are not a licensed builder
We cannot assist you with construction finance as there are no lenders that offer this product.
However, we can arrange a low doc loan for up to 80% of the land value (not the on completion value) as well as 80% of the value of any other properties that you own. Once your property is complete we can then increase your low doc loan to 80% of that properties value.
For more information or to speak to one of our expert mortgage brokers, please enquire online or call us on 1300 889 743 and we can help you apply with the right lender. Speak to us today!
Small developments
One of our lenders specialises in helping developers complete small projects. This finance is ideal for builders who are making the first step from building to developing but who don’t yet have the track record of successful projects to obtain approval from a mainstream lender.
We can help you to finance a project of up to four dwellings to a maximum loan amount of $1,500,000. You will not need to provide evidence of your income other than an accountant’s letter.
You can borrow up to the lesser of 70% of the Gross Realisation Value (GRV) or 80% of the hard costs (value of land plus cost of construction only).
No presales are required for small duplex, townhouse and unit developments with four or less dwellings. You may refinance your project on completion with a standard investment loan or low doc loan and keep some of the properties.
If you would like our help to finance your project, then please call us on 1300 889 743 or enquire online and one of our mortgage brokers will assist you in applying, to ensure that you get approval!
Partially complete homes
Have you run out of money half way through your owner builder project? Has your bank refused to lend you additional funds to complete your home?
Or did you start construction using your own funds before you sought approval from your bank?
Unfortunately, almost every lender in Australia will not accept a partially built home as security for a mortgage.
You must apply for the loan either before you start construction or when the construction is completed.
However, if you need additional funds during construction we can help you in the following situations:
- Owner builder: We can lend up to 60% of the total cost.
- Licensed builder building their own home: We can lend 75% of the total cost.
- Standard construction with a licensed builder: We can lend 80% of the total cost.
The above loan amounts must be enough to pay out your existing mortgage and complete the construction of your property.
There are no exceptions to the above Loan to Value Ratios (LVRs).
If you would like our help to finance the completion of your project, then please call us on 1300 889 743 or enquire online and we can assist you in obtaining the funds you need to complete your project.
Note that for partially complete homes we will charge a brokerage fee as there is significantly more work completed by us then there is for a standard home loan.
Using a guarantor with a construction loan
If you have a friend or family member that can guarantee your loan then you may be able to borrow more than 80% of the project cost and up to a maximum of 100% on a case by case basis.
For more information please refer to our no deposit guarantor loan page.
Standard guarantor loans are not available, you will need to apply for an 80/20 guarantor loan.
This is where the guarantor takes out a mortgage on their property and then lends this to you to make up the difference between your 80% mortgage secured by your property and the amount that you require to complete the project.
For more information on how a guarantor can help you get a construction loan, please call us on 1300 889 743 or enquire online. We can assist you in applying, making the process less stressful.
Which documents do you need to provide?
As an owner builder you will need to provide more documents than a traditional borrower.
- Building plans / floor plans.
- An itemized estimate of the total cost of construction.
- A copy of your owner builder insurance (if applicable).
- Evidence that you are using the Home Building System (if applicable).
- A copy of your owner builder permit (if applicable).
Once you have obtained council approval you will be required to provide a copy of the council approved plans to the lender.
Still not sure of what documents you need for your situation? Enquire online or call us on 1300 889 743 and our mortgage brokers can help you apply for a loan today.
Value or Cost?
When lenders assess the value of a property that is yet to be built they ask their valuer to be a “To Be Erected” or TBE valuation.
Typically, the valuer will look at the plans, the cost of construction and in almost all cases, will value the construction project at the value of the land plus the cost of construction.
Lenders are always conservative when assessing the value of the property you are using as security.
They will use the lesser amount of the actual valuation or the total of the purchase price / value of the land and cost of construction.
This is no different for owner builder loans and as a result it is important to have significant equity in your vacant land otherwise you may not be unable to obtain a loan approval.
Please enquire online or speak to us on 1300 889 743 for more information.
Our mortgage brokers will aim to assist you in getting the loan amount you need. Call us today!
How are the loan funds advanced?
Unlike a traditional home loan, the lender will not pay you all of the loan funds when the loan is setup. Instead they will release funds to you as construction progresses.
This is known as ‘progress payments’ or ‘construction draw downs’.
Once you have completed each step of construction a bank valuer will be sent out to assess your work, confirm you have followed the floor plans and then authorise the bank to make the next payment.
If you have significant equity available in your land then we may be able to arrange a line of credit based on the value of your land alone.
This will allow you to build your new home without the need for the lender to monitor your progress. This is usually available when you are borrowing no more than 80% to 90% of the land value alone.
For more information, please call us on 1300 889 743 or enquire online and one of our mortgage brokers will contact you to discuss your situation. Let us help you get approved!
The golden rules
We’ve helped a lot of owner builders finance their construction project. Unfortunately, many people make mistakes that can be easily avoided. Follow these simple rules to avoid the headaches!
- Don’t run out of money: If you run out of money during construction then in most cases the bank will NOT approve a loan increase for you. In other words, you are in big trouble! We have one lender that may be able to help if you run out of money. However, unless you are a licensed builder yourself they will not lend any more than 60% of the project cost.
- Don’t begin construction yet: Wait until your loan is formally approved before you commence construction. The majority of lenders will not approve a loan if you have already commenced construction. Unfortunately, many people are not told this by their bank. Most people begin building using their savings and only apply for a loan towards the end of the project, when they run short of funds.
- Budget carefully: Complete a cost estimate worksheet before beginning your project. You will need to provide this to the bank as part of your loan approval. Please make this as accurate as possible and include a contingency in-case you go over budget. If this isn’t done properly then you risk breaking rule number 1. In addition to this, try not to make many changes after your loan is approved, as in some cases, you may need to re-apply for your mortgage.
- Experience counts: Are you sure you know what you are doing? If you have trouble creating the budget for your project or do not have a background in the construction industry then we do not recommend that you build your own home. Inexperienced owner builders are almost certain to regret the decision to build their own home.
Do you need help to apply for your owner builder mortgage? Please call us on 1300 889 743 or enquire online and one of our mortgage brokers will discuss your options with you.
Owner builder training courses
We strongly recommend that you complete the appropriate training before you begin your construction project. In some states, this is mandatory.
We recommend undertaking a course with ABE Education who are a Registered Training Organisation that provides quality nationally accredited training to owner-builders in NSW and owner-builder training in the ACT.
This training will enable you to obtain your owner builder permit/ licence & will assist with your finance approval.
ABE Education specialise in e-learning which is simple, user-friendly and interactive. You can take as long as you wish to complete your course, as all your work is saved for the next time you log in.
Visit ABE Education website for more information. The contact details are:
ABE Education
Phone: 02 9798 5000
Fax: 02 9225 9656
Email: info@abeeducation.com.au
Website: http://www.abeeducation.com.au
Learn more about building your own home
Success in owner building is all about educating yourself so that you’re aware of all the challenges and pitfalls that lie ahead.
A great resource that we highly recommend is The Owner Builders Guide.
It is an easy to follow publication that has been written specifically for first time owner builders, which specifies the entire step-by-step process of a construction project from start to finish!
It provides a detailed guide on all the different stages of building, as well as information about working with tradespeople and suppliers.
The Owner Builders Guide provides a wealth of information to give you every chance of succeeding as an owner builder.
Why are the banks so conservative?
In the past many lenders were happy to work with owner builders. However several banks noticed that there was a high incidence of people changing their plans, going over budget or not completing the project.
Because of this, many banks and building societies withdrew their funding for people that are building their own home.
Lenders tend to view some applicants more favourably than others.
Applicants that are licensed builders, have experience with one or more trades or that are using a program such as the Home Building System are seen as a lower risk to the lender.
For more information on different lending policies or to speak to a specialists mortgage broker about applying for a loan, enquire online or call us on 1300 889 743 and we can help you get approval!
How can we help?
Our mortgage brokers are experts in home loans for people building their own home.
We know which lenders can help, how they will assess your application and even how to best present the cost estimate, to ensure the loan is viewed favourably by the credit assessor.
If you would like our help with your project then please call us on 1300 889 743 or enquire online & one of our brokers will give you a call to discuss your situation. Speak to us today!
