Find and compare owner builder home loans

Owner builder loans are also known as construction loans because they relate to a home you plan to build yourself to live in.

Why build for yourself? You probably want to create a home style that will match your lifestyle, reflecting your character and values as well as your environment. It's a worthy ambition to create an original home and is one that owner builder loans can help you realise.

Applying for an owner builder home loan is often a considerably more laborious process than applying for your run-of-the-mill home loan. Hopefully, if you’re an aspiring owner builder, you’re not the type who shies away from a bit of hard labour.

The reasons owner builder loans are so much trickier to be approved for? Building a house almost never costs the original quoted price; it’s a risky business; and banks don’t like risks.

Owner builder home loans operate differently from standard home loans in a number of ways. 

To apply for an owner builder home loan, you'll need to provide thorough documentation of your project, including:

• Your project plan
• A cost estimate
• Your financial plan/budget
• Your builder’s insurance
• A builder permit

In a more typical home loan, you may be able to borrow up to 95% of your home's value to purchase the property. When it comes to owner builder loans, most banks will not lend you more than 60 per cent of the build cost, so it's important to have funds available for materials and other expenses. If you are a licensed and experienced builder, you can usually borrow up to 80 per cent of the build cost.

If you are approved for an owner builder loan, you will not be given the funds up front like with a regular home loan. You will be required to complete each stage of construction, then have it assessed and approved by a valuer, before the lender will grant you the next process payment.

Usually you can borrow ongoing interest as part of your finance package. This means that the interest is capitalised, but you don’t pay interest until your project is completed. Capitalising interest means that interest is charged on the funds you borrow and added to the amount you owe, so you pay interest on your interest. 

Getting approved for an owner builder loan is all in the preparation. You are going to have to jump through a whole lot of hoops to get to the finish line, so make sure you’ve done your hoop-jumping homework.  

If you are not already a licensed, experienced builder, then you will likely need to attend a prescribed owner builder course (bar some exemptions). 

Check if you have a clear credit history, as if you have bad credit or a bankruptcy against your name, you are unlikely to be accepted for an owner builder loan. 

Prepare, plan, and prepare some more. Fail to prepare, prepare to fail. You must be as meticulous as possible in your plans for your imminent build. A lender will scrutinise you to determine that you are as risk-free a borrower as possible. If you run out of money before the project is finished, they are unlikely to lend you more, and you may have to end up relying on family or personal loans.