Jun 19, 2021 1:34 pm
Have everything ready for owner build extension: VBA OB certificate of consent, all plans, engineering, soil etc certifications, approvals and building permit. We own our house outright, value approx $1,200,000 and want to borrow around $300k, combined income around $90k p/a. Some banks wont even discuss OB loans. Seems OB is a very dirty word these days!
Others want total control of costs and payments. Are there any lenders who offer what is basically an equity loan at decent interest rates?
To be honest I'm staggered at how difficult this is - seems they'd fall all over themselves to lend us a lot more to buy an investment property.
Re: Owner Builder loan options2
Jun 19, 2021 2:04 pm
I think you will find it extremely difficult to find a lender that will do owner builder loans, I tried about 4 years ago, i have my diploma of builders registration and work for a builder but couldn't get finance. Initially tried myself then went through a broker but know one was willing to lend the money.
Re: Owner Builder loan options3
Jun 19, 2021 2:18 pm
Thanks Doozer. Notice you're in WA - we're in Vic. We've got to the stage with our current home loan bank to the application and prelim approval stage, but it's a little vague regarding how funds will be allocated. I might complete the forms and see how that pans out. Will also contact a broker or two and see what they say. NAB website seem to imply that OB's are accepted; might ask them as well.
The fact that we have total equity MUST be worth something?! It's astounding that they'll lend to people for a new house who are highly likely to go under or suffer extreme mortgage stress if interest rates go up or one of two earners loses a job. I'm flabbergasted.
Re: Owner Builder loan options4
Jun 19, 2021 3:27 pm
The simplest thing to do is take out a mortgage on your house for the funds you need and then just use that money to do the reno.
Don't tell the bank what you are doing.
We have owner built twice by taking out a mortgage on blocks of land we owned, then used the money to OB houses on them.
It's easier to ask for forgiveness than permission when it comes to banks.
Accessible Carpentry & Cabinets
Re: Owner Builder loan options5
Jun 19, 2021 4:48 pm
Thanks Chippy. What you say makes absolute sense. We have equity, they want to lend money - win-win! Prob is the first thing they ask me is what I want the money for. So at that stage I could lie outright but I fear it could come back to bite later.
Did they ask you at all what you wanted the money for? And how long ago did you build? The ANZ guy admitted to me that this attitude came into being around 2 or 3 years go - gee, that sounds suspiciously like when the Royal Comm into the banking sector released its findings!!
Re: Owner Builder loan options6
Jun 19, 2021 5:44 pm
We built about 2 years ago but bought the block about 3. We are with ANZ.
Funny thing is, now I think about it they probably still assume they have a mortgage on a vacant block not a block with a fully completed house that's worth 3 times as much.
Plenty of people take mortgages on their house and use that money to invest in anything else they like. Some buy shares, some buy investment properties. All the bank cares about is that you can service the loan and that they can get their money back if you can't pay them. It's that last point that could be the sticking point if they knew what you planned.
You see they would lend based on the valuation of your property, however if you are half way through a reno and they had to sell your house it may affect what it's worth as a bank sale.
Our mortgage broker said it was the same thing with us building. An empty block is easier for the bank to sell than a half built house.
At the end of the day if you are only going to be getting a $300k loan on a $1.2M property they are always going to be able to get their cash back regardless.
Just get the mortgage (assuming you qualify) and if the question is asked about what you are going to do with the money, you just say you are looking into investment opportunities.
Technically you are investing in your own property by adding value.
As I said we have done it twicewithno issues.
Accessible Carpentry & Cabinets
Re: Owner Builder loan options7
Jun 20, 2021 1:29 am
Great info.Thanks heaps for posting. What you say was confirmed by my brother in law this evening, who secured a $150k loan based on a number of desired spends (update their bathroom, landscaping etc). So I'm going to see how I go with it. there is absolutely no chance of this project going pear shaped and it will definitely add a lot more to the value of our equity (our house) when it's done than the amount we borrow.
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