Compare owner builder loans

Compare owner builder loans and calculate mortgage repayments - Data last updated on 20 Jul 2018

Compare owner builder loans

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Discount Variable Investment Loan (Principal and Interest) (LVR<80%)
Advertised rate
4.44%
Variable
Comparison rate*
4.49%
Monthly repayment
$1,258
Real Time Rating™

3.43 / 5

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IQ Basic Home Loan (Principal and Interest) (LVR < 70%)
Advertised rate
3.75%
Variable
Comparison rate*
3.76%
Monthly repayment
$1,158
Real Time Rating™

4.3 / 5

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Basic Variable Rate Home Loan
Advertised rate
3.77%
Variable
Comparison rate*
3.81%
Monthly repayment
$1,161
Real Time Rating™

4.19 / 5

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First Home Buyer Loan - 40 Year Term
Advertised rate
3.77%
Variable
Comparison rate*
3.81%
Monthly repayment
$1,161
Real Time Rating™

4.19 / 5

Compare
IQ Basic Investment Loan (Principal and Interest) (LVR < 70%)
Advertised rate
3.99%
Variable
Comparison rate*
4.00%
Monthly repayment
$1,192
Real Time Rating™

3.99 / 5

Compare
My Life Fixed Rate Package 2 Years
Advertised rate
3.69%
Fixed - 2 years
Comparison rate*
4.04%
Monthly repayment
$1,149
Real Time Rating™

3.9 / 5

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My Life Fixed Rate Package 3 Years
Advertised rate
3.85%
Fixed - 3 years
Comparison rate*
4.05%
Monthly repayment
$1,172
Real Time Rating™

3.88 / 5

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Discount Variable Home Loan
Advertised rate
4.64%
Variable
Comparison rate*
4.69%
Monthly repayment
$1,288
Real Time Rating™

3.15 / 5

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Extra Investment Loan (Interest Only)
Advertised rate
5.18%
Variable
Comparison rate*
4.75%
Monthly repayment
$1,370
Real Time Rating™

2.53 / 5

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Choice Package Tailored Home Loan (Principal and Interest) ($250k-$750k)
Advertised rate
4.39%
Variable
Comparison rate*
4.78%
Monthly repayment
$1,250
Real Time Rating™

3.76 / 5

Compare
3 Year Special Economiser Home Loan (Low Doc)
Advertised rate
4.29%
Intro 36 months
Comparison rate*
4.78%
Monthly repayment
$1,306
Real Time Rating™

3.52 / 5

Compare
Choice Package Tailored Home Loan Fixed (Principal and Interest) 5 Years
Advertised rate
4.09%
Fixed - 5 years
Comparison rate*
4.80%
Monthly repayment
$1,207
Real Time Rating™

3.71 / 5

Compare
Choice Package Tailored Home Loan Fixed (Principal and Interest) 3 Years
Advertised rate
3.94%
Fixed - 3 years
Comparison rate*
4.84%
Monthly repayment
$1,185
Real Time Rating™

3.56 / 5

Compare
Premier Package Low Doc Fixed Options Home Loan (Principal and Interest) 3 Years
Advertised rate
3.99%
Fixed - 3 years
Comparison rate*
4.85%
Monthly repayment
$1,192
Real Time Rating™

3.5 / 5

Compare
Extra Investment Loan - 4 Year Introductory Rate (Interest Only) (First Home Buyer)
Advertised rate
4.19%
Intro 48 months
Comparison rate*
4.85%
Monthly repayment
$1,331
Real Time Rating™

3.61 / 5

Compare
Premier Package Low Doc Fixed Options Home Loan (Principal and Interest) 2 Years
Advertised rate
3.89%
Fixed - 2 years
Comparison rate*
4.88%
Monthly repayment
$1,178
Real Time Rating™

3.39 / 5

Compare
Breakfree Package Fixed Rate Home Loan (Low Doc) 3 Years
Advertised rate
3.99%
Fixed - 3 years
Comparison rate*
4.90%
Monthly repayment
$1,192
Real Time Rating™

3.49 / 5

Compare
Choice Package Tailored Home Loan Fixed (Principal and Interest) 1 Year
Advertised rate
3.89%
Fixed - 1 year
Comparison rate*
4.96%
Monthly repayment
$1,178
Real Time Rating™

3.21 / 5

Compare
Breakfree Package Fixed Rate Home Loan (Low Doc) 2 Years
Advertised rate
3.99%
Fixed - 2 years
Comparison rate*
4.96%
Monthly repayment
$1,192
Real Time Rating™

3.31 / 5

Compare
Choice Package Tailored Home Loan (Interest Only) ($250k-$750k)
Advertised rate
4.92%
Variable
Comparison rate*
4.96%
Monthly repayment
$1,330
Real Time Rating™

2.77 / 5

Compare
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Owner builder 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, (though hopefully, if you’re an aspiring owner builder, you’re not the type who shies away from a bit of hard labour). The reason 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.

Why is it so hard to qualify for an owner builder home loan?

Qualifying for an owner builder home loan is harder than qualifying for a normal home loan because it presents a much bigger risk to the lender. You might be confident in your ability to build your dream home, but the bank doesn’t know you or your abilities. 

A lender can look at your credit file and get an idea of how you might be able to manage a budget, but that doesn’t give them any indication of your ability to manage a long-term construction project. Unless, of course, you are a licensed and experienced builder, in which case you pose less of a risk and are more likely to be accepted for an owner builder loan.

How to owner builder home loans work?

Owner builder home loans operate differently from standard home loans. Here are some of the ways in which they work differently: 

  • You will need to provide thorough documentation of your project. You will need:
    1. Your project plan
    2. A cost estimate
    3. Your financial plan/budget
    4. Your builder’s insurance
    5. A builder permit
  • Most banks will not lend you more than 60 per cent of the build cost. So, it is important to have funds available for materials etc. 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 and have a valuer assess and approve it, before you will be granted the next process payment by the lender.
  • 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. 

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How do I get approved for an owner builder loan? 

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). 

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.

Owner builder home loan tips

Be realistic about what you can afford. Running over budget can negate the cost savings of owner building. You ought to be prepared for this to happen. If you are determined to have a dream house of your design, then this might not matter to you, but if the cost savings are an important factor, make sure your plans are as airtight as possible, or really think about whether this is the right move for you.

Add a 20 per cent contingency buffer to whatever estimate you are given, in case anything goes wrong. Banks will generally add a 20 per cent contingency buffer to your loan, which means that any deposit you will need will be larger, so make sure you factor all of this into your budget. This means that if the project you are building is valued at $500,000, the lender will often assume a build cost of $600,000. If you are required to provide a 40 per cent deposit, it will mean a deposit of $240,000 as opposed to $200,000. 

Don’t start building until you gave secured the finance. Lenders will generally not accept you if you have already started the project. 

Related articles

https://www.ratecity.com.au/home-loans/articles/three-mistakes-home-buyers-make 

FAQs

Bad credit home loans can be dangerous if the borrower signs up for a loan they’ll struggle to repay. This might occur if the borrower takes out a mortgage at the limit of their financial capacity, especially if they have some combination of a low income, an insecure job and poor savings habits.

Bad credit home loans can also be dangerous if the borrower buys a home in a stagnant or falling market – because if the home has to be sold, they might be left with ‘negative equity’ (where the home is worth less than the mortgage).

That said, bad credit home loans can work out well if the borrower is able to repay the mortgage – for example, if they borrow conservatively, have a decent income, a secure job and good savings habits. Another good sign is if the borrower buys a property in a market that is likely to rise over the long term.

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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.

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