Construction loans for owner builders are not broadly welcomed by Australian financiers. While regular construction loans have their own challenges, construction loans for owner builders are even more complicated.

Who Are Owner Builders?

Property owners who manage their own residential building project in whole or in part are considered to be owner builders.

Will Financiers Lend to Owner Builders?

There are a limited number of financiers that accommodate owner builders. Within the Islamic finance space, there is only a specialist financier that supports owner builders, but they impose very strict rules. These rules include prior building experience, an additional buffer of funds, or having a licensed builder supervise the project.

What Makes Owner Builder Loans Unique?

There is an inherent risk with owner builders frequently changing their building plans, susceptibility to cost overruns, or even not completing the construction on time and within the original budget.

What Documents Are Needed for an Owner Builder Loan?

For an owner builder construction loan, additional documents may be required, including:

• Evidence of sufficient funds, with an additional buffer of 10% to 20%.
• A completed Owner Builder Independent Advisers report, including written evidence from a recognized local building advisory service, architect, quantity surveyor, or independent licensed building inspector.
• The total cost of construction to complete the owner builder project.
• Additional documentation to support the ‘as if complete’ valuation, such as:
  • Engineer’s detailed drawings
  • Engineer’s Certificate
  • Interior design plans with specifications for all fixtures and fittings

What’s the Maximum LVR for an Owner Builder Loan?

Due to the inherent higher risks associated with owner builders, financiers typically allow a maximum loan to value ratio (LVR) of 60% to 70%.

How Will Financiers Fund the Construction Costs?

Similar to regular construction home loans, financiers will advance funds under progress payments throughout the project. Your funds will need to be utilized first, with the financier funding the completion of the build. During the construction process, any variation to the estimated cost may need to be covered by the customer.

Looking for a Specialist to Help You with an Owner Builder Loan?

We aim to support Australians in achieving their financial goals and dreams. Building your own home is a personal and significant endeavour, and we understand this. We also understand the complex policies that lenders have surrounding construction loans, especially for owner builders. We are your perfect partners to help navigate these financial complexities.

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