Browse Forums Owner Builder Forum 1 Jul 25, 2008 10:44 am Hi All,
Does anyone know how hard it is to borrow for land and build? I have been told its alot harder than purchasing established, I'm guessing because they have more to secure against that way. Has anyone owner built (hire our own project manager) and found finance hard? We are looking at a borrowing amount of 80% so not sure what our chances are.. We would be doing it this way because my partners in the trade and we can save about 40% on building cost. Thanks! Kylie Re: Finance for building and or owner builder 2Jul 25, 2008 10:53 am PrincessB - we've had no problems getting pre-approval for finance - land and house.
All the bank wanted was copy of the land contract and building tender/contract. A friend is a mortgage broker and said we shouldn't have any problems - however it's owner builders that he said banks were more wary of. Not because of their skill - it's more that they are often inexperienced at building and their budget of $200k for the house often increases substantially. Banks don't like lending when there is uncertainty. have you thought about going through a custom builder? That way - you have a contract with them you can take to the bank - and they are often a lot more flexible with allowing you to handle some parts yourself. After 4 years - we're in! Re: Finance for building and or owner builder 3Jul 25, 2008 11:07 am Hi Stonecutter,
Thanks for your reply! Its silly but didnt think of that. I only knew that the big builders would not let us do anything ourself, which we really want to do because my partner has a concreting business and we can get a slab for next to nothing, we have so many contacts such as plumbers, painters etc who are willing to do labour for beer (we supple materials)! Good friends to have. However, we dont have the time to do owner builder completly. But will look into a custom builder, basicly all we need is the frame work and roof! Still waiting on pre approval with CBA, borrowing 80% makes it hard. Any ideas where you can find one in your area (we are in Brisbane) or should I just Google? Re: Finance for building and or owner builder 4Jul 25, 2008 11:09 am Hey PrincessB - can't help you with custom builders in Brisvegas as we are in Sydney - but Google, display home villages are all worth a shot.
An idea might even be to go to a lot of areas with custom built homes (Brookwater estate is one that comes to mind instantly) and going for a drive - if you spot something you like - knock on the door and ask - can't hurt! Perhaps start a new thread on it so that brissie locals can help. After 4 years - we're in! Re: Finance for building and or owner builder 5Jul 25, 2008 11:14 am yeah banks dont make it easy for owner builders as in their experience people run out of money half way through the build and its difficult for them to recover funds from a half built house.
You would have a greater chance with a mortgage broker as they can actually negotiate with the lender and take circumstances into consideration where in a typical application process you either meet their criteris or you dont. Not all are very good though the first one we used said we should be ok (used a family member property as guarantor) but it didnt happen with him I dont think he was very good he kept telling us the owner of the collateral house also needs a fulltime job despite the property being owned outright,, defeats the purpose of having the house as collateral is thats the case. We spoke to someone else whoe really made a good effort and negotiated with an uneasy bank and got the loan I think about 70% some lenders will only lend %50 - 70 and maybe 80% Also most lenders require quotes for everything prior to getting the loan so they know exactly what it will cost this can be very time consuming and difficult to get quotes until you have spent a fe thousand on getting the drawings done. After which they will release cheques to tradies for each step of progress after it has passed their independant inspection which also involved more costs. We managed to bypass this as I knew it would just slow the proccess down and make it much more difficult so with the collateral house we managed to get them just to give us the full amount we needed to spend as we wish no quotes or progress payments plus they required us to refinance our land loan with them. Re: Finance for building and or owner builder 6Jul 25, 2008 11:18 am Thats great, thank you both for your replies. Its getting easier for me to understand the process so that I can be better prepared. Our pre approval thats in process is supposed to be finalised today, so far it is 'conditional' on receiving some other docs. Fingers crossed. Re: Finance for building and or owner builder 7Jul 25, 2008 12:53 pm If things don't work out with CBA, try NAB ... they have a loan tailor made for owner builders Re: Finance for building and or owner builder 8Jul 25, 2008 1:55 pm Speaking of the devil. Got phone call and letter emailed with pre approval, finally. Hold up due to partner being self employed. Apparently this covers building but have not mentioned the owner builder yet. Think we will go custom build excluding a few things so will leave that until we decide.
Have heard NAB is great with lending, but had to stay with CBA as I am withdrawing equity to use as my deposit from a rental prop. Only reason I'm sticking with them for now.. Thanks everyone, now off to display homes this weekend Re: Finance for building and or owner builder 9Jul 25, 2008 5:49 pm I have heard that banks are a bit tight with lending to owner builders. I didn't have a prob, however I only needed to borrow 20%.
I know my cousin tried and got rejected. He was told that they will give him a substantial loan no prob as long as he has a contract with a registered building practitioner. Re: Finance for building and or owner builder 10Jul 28, 2008 11:54 am All very interesting, thank you. I suppose I will just have to have a chat with them and see if this pre approval covers owner building. Any know if it helps if you offer to use another property almost owned outright as security? Re: Finance for building and or owner builder 11Jul 28, 2008 12:36 pm Yes it will, but I think CBA will want a first mortage on the other property as well. If it is currently mortgaged to another lender, you'll have to clear that loan or refinance it with CBA. Re: Finance for building and or owner builder 13Jul 28, 2008 5:45 pm I have used an owned outright property as security with our cba owner builder loan however they were limited to how much they would give us and we also did need to refinance our land loan. Re: Finance for building and or owner builder 14Aug 23, 2008 1:36 pm We've just started looking for owner/builder loans... even though we own our land, we're still getting a lot of reluctance. I'm not too sure what to do if we can't find a suitable lender... Re: Finance for building and or owner builder 15Aug 24, 2008 8:21 am I'd say the easiest way would be if you had another property (with a house on it) to use as collateral if possible also would probably help to get a good mortgage broker as they can usually negotiate with them and certain circumstances can be taken into consideration where usually a loan application would just get processed by a computer to determin if you meet their 'criteria'
The first mortgage broker we used was of no help as I dont think he knew what he was doing we didnt stop there though as the second guy was very helpful. Also there are lenders that specialise in owner builder loans that might be a bit more accommodating but unsure if they are any good I was always dubious about them, places like ask homes provide this service. Re: Finance for building and or owner builder 16Oct 25, 2008 8:23 am Make no mistake in the current climate the money supply is and has dried up and owner builder loans are seen as a much higher risk than a build with a registered builder.
As I've said on other posts, the key to successful owner building is having the right support team around you and that starts with highly detailed and professional documentation so that the bank can have some confidence that you know what you are doing and where you are going - this is part of what I do. I have only yesterday spoken to a banker (BankWest) about this and he confirmed that if they see someone experienced standing behind you under a formal agreement to offer direction and advice then they are much happier and may treat you as though you had a signed contract with a registered builder. The sort of documentation we can present to the bank on you behalf would likely be astronomically better than most builders anyway. This particular banker I mentioned mainly deals with commerical deals and development however I am sure that he would be happy to talk to anyone who called - PM or email me for his details if you want. Builders are people too.... Construction loans, house and land 17Nov 27, 2008 3:02 am Owner Builder loans always had a lower Loan to Value Ratio but in the last 12 months they have been reduced even more. What's worse is that you only have a handful of reputable lenders that lend against this. Especially if one of the applicants is self employed, you are going to have tough time. There are some regional non bank lenders that try to fill this gap somewhat but I wouldn't recommend as their costs are quite high. The engineering is the engineering. It's irrelevant how much material you have. Unless it fits the requirements of your design the engineer can't "make"it work. You might… 7 9687 you were just referred to get advice from your solicitor. This is a legal matter. Separately, why would you use a buyers agent for a house and land package? 3 56356 |