Owner Builder Construction Loan

Any general questions you might have in regards to loans and finance.
Leisam18
Posts: 1
Joined: Sat Jul 21, 2018 8:40 am

Owner Builder Construction Loan

Postby Leisam18 » Thu Aug 01, 2019 4:48 pm

Am I chasing a Unicorn?

We are looking at building a house on a block of land we own outright.
House plans have been DA approved form our local council.

Land valued at $365,000 purchased outright.
Have approx $30,000 in savings.

Is there anyone out there that would give us a loan for $500,000 to owner build our house? (we are not qualified builders).

Could we unlock some equity from the land to cover the deposit?

Please help.

Thanks

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Otto Dargan
Mortgage Specialist
Posts: 7706
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Owner Builder Construction Loan

Postby Otto Dargan » Sun Aug 04, 2019 6:57 pm

Hi Leisam18,

Welcome to our forum.

For owner-builders who are not qualified builders, your loan is limited to 60% of the land value plus cost of construction. In your case, if the land value value plus cost of construction is $865,000 ($365,000 + $500,000), you’ll be able to borrow up to $519,000. So, yes, it’s possible but only with a couple of lenders.

A couple of important things to consider:
  • Don’t run out of money: If you run out of money due to contingencies, banks won’t approve a loan increase for you. Unless you’re a licensed builder they won’t lend you more than 60%.
  • Don’t begin construction as of yet: Lenders won't approve your loan if you’ve already started construction. Many first time builders begin construction with their savings only to find out later that lenders won’t approve their loan.
  • Budget carefully: You’ll need to provide a lot more documents than a traditional builder. A cost estimate worksheet and a contingency plan/savings if you go over budget will need to be provided to the bank.
  • Experience counts: A lot of inexperienced owner-builders who don’t have a background in the construction industry have trouble creating a budget and sticking to it. We don’t recommend building your own home if you don’t have experience.

Some states require mandatory owner-builder training before you can begin your construction project. We recommend undertaking a course with ABE Education, a Registered Training Organisation that provides quality nationally accredited training to owner-builders in NSW and the ACT.

This training will enable you to obtain your owner builder permit/ licence and will assist with your finance approval

We specialise in construction loans of all types and can help you prepare the necessary documents such as the cost estimates so that they are acceptable to credit assessors.

Please give us a call us on 1300 889 743 or fill in our online enquiry form and one of our specialist mortgage brokers will give you a callback.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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