View Full Version : Your owner-builder experience
21st Apr 2012, 10:21 AM
We have a renovation to finish. Even without an extension, we're going to be up for about 80k, including re-cladding, concrete and a new garage (to replace old falling-down asbestos.) We located a builder who is in the ball park pricewise for what we need, and he's like-minded regarding sustainability and energy efficiency. 80k is probably at the top of the limit of what will be reasonable in this neighbourhood, so we're considering our options.
The bank, credit union, whoever we have spoken to, refuse to loan to owner-builders. I do understand their reluctance to do this. They require a fixed-price building contract to consider the finance. On the flip side, to engage a builder to do the fixed-price contract is going to incur some serious cost (draftsman, engineering, his time, minimum of $2500, which we don't have spare). I don't expect this to be done for free. Catch-22 situation.
Moondog and I are more than competent enough to run our own build. I have a background in design, and have done this once before (a whole house too, not just a refurbishment.) We have builders in the family we can call on for advice. Ted has developed a relationship with the local timber yard, a sparky, local carpenter. I work locally and can be on site when required. I understand the requirement for insurances
I'm not afraid to shop around for a lender who will do the owner-builder thing. I am capable of drawing up a gantt chart for the project. I am aware that anecdotally, the only owner-builder lending that is generally done is to folks actually working in the building trade.
I think this refusal to loan to owner-builders is something of a knee-jerk reaction, without due consideration for the individual circumstance.
I guess I'm wanting to know, how much fiddling around did you have to do to become an owner builder? How many lenders did you try before you found one?
21st Apr 2012, 12:06 PM
I have recently applied to the bank for funds to complete my build. I supplied them a project plan, suppliers, costs etc and time frame, they supplied this info to the valuer and they just simply added the cost I supplied ontop of last valuation which is ridiculous or its a con somewhere a long the line. I would have been better off supplying my own quote including my labour, and setting up my own company and submitting that to the bank to get a real valuation. They have palmed me off to a mortgage broker to finalise the deal as a construction loan, I am not sure its worth it but I will see what happens, I might just take longer as the build I have is optional.
21st Apr 2012, 08:42 PM
Yes, unfortuneatly it is incredibly difficult to get owner builder finance, we only managed on the last one because my wife works at a bank, this current OB project we were lucky enough to not need bank finance with some juggling around with our mortgage/s.
Can you re-finance your house (I gather the OB project is a home you are currently living in), borrow as much as is possible, up to 80-90% of a valuation?
thats what we did. Would that give you enough cash to do it....
And yes, its a shame all OB's get tarnished with onerous requirements because of a few problems the banks etc may of had with OB's.
23rd Apr 2012, 03:21 PM
We borrowed nothing for our OB - but we have strung it out over a number of years.
OB finance is basically too hard to get and not worth the cost/effort. As a plain old OB you'll struggle to get more than 60% of the combined land value and renovation value anyway...so if this isn't enough to do the job then you'll struggle from the get go.
I'd be looking to structure your project into smaller and more manageable components. Smaller chunks that make up a grand plan. And treat those smaller chunks as discreet projects.
This is basically how we did our place...
23rd Apr 2012, 04:08 PM
We've spoken about lines of credit before, that it takes a lot of self control, can be dangerous etc etc but this is how I funded my OB.
Just silly numbers but for example, buy a house with $100K mortgage. A few years later convert it to a LOC while paying out $50K as quickly as possible. Do OB with $50K available LOC. The bank doesn't get involved and the only time it's considered an OB is when you tick the box on the permit paperwork. Or you could buy a jet boat...
29th Apr 2012, 08:00 PM
we changed banks so that we could go the OB build. (NAB) They will lend us 70% of the final agreed value of the property (house and land). I think you just need to get all your ducks in a row before you go and approach them. I am not in the building industry at all, but do know how to plan. It was even suggested that if we could slow the process by using what money that we have to build our house to lockup, then approach the bank for the fit out. Mostly because the lockup stage is where we will do the most of the work ourselves. Considering I am finding it very very difficult to get quotes on getting a house to lock up. Seems most builders are quite happy to build you a house, but not to lockup... (no markups on the eleco, plaster, kitchen, bathrooms, flooring etc) We have transferred the debt from the block to the house that we reside in at the moment. Then we can use the cash that we get from the sale to build to lock up. But doing it like this we are trusting the bank will lend us the rest for the fit out. Our block loan has an offset account that we can put the cash from the house in so it to further maximise savings. But thats all theory and what we were told at our local bank. Proof will be in the application in 6 months.
2nd May 2012, 06:04 PM
We spoke to a broker who advised us that we just need to tell him the amount of $ we need (within reason) and he will get it for us. We will be borrowing $60k (for a $100k build) and the banks call it a "top up".
If we do OB or get a builder it doesnt matter. The $ is there for us to use. Heck, I could buy two Euro cars and they wouldnt know! Get onto the phone to a broker and see what they can do. If you want a good one in Sydney let me know and I will pm you the one we are going to use.
29th Aug 2012, 03:11 PM
We changed from St George to ANZ and did it on a line of credit. They asked us to sign a stat dec to say the money would be used for property investment, but other than that it was easy. Its a bit dangerous if you are not good at managing your budget but very free of bank interfering re your project.
We got $200K and are up to $170 spent so far on a 3 bedroom + bathroom add on to our 50's brick vineer home.
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