Get the Finder app 🥳

Track your credit score

Free

How owner builders can increase their shot at getting a home loan

As an owner builder, lenders will make you jump through hoops to qualify for finance, which is why it pays to know a thing or two about how you can maximise your chances of being approved.

Updated

Fact checked

We’re committed to our readers and editorial independence. We don’t compare all products in the market and may receive compensation when we refer you to our partners, but this does not influence our opinions or reviews. Learn more about Finder.

Owner builder home loans

Australian lenders are conservative when it comes to providing funds to owner builders. They tend to be sceptical of your ability to not only manage a budget but also manage a complex and long-term construction project. For them, it’s risk galore.

If you meet stringent lending criteria such as having enough equity, savings or a guarantor willing to offer security for the loan, you may have a better chance of being approved for a home loan application.

Find out how you can stand out from the crowd when you submit your owner builder loan application.

How to maximise your chances of being approved

  • Effective budgeting. As part of your loan application, most lenders will need to see a cost estimate for your project. You’ll need to ensure the numbers are as accurate as possible, and you should always include a 10-15% contingency buffer. Unless you're a licensed builder, most banks won’t lend you more than 60% of the build cost, so it’s important that you don’t run out of funds midway through construction.
  • Pre-approval. It’s wise to seek pre-approval before entering an owner builder arrangement. Pre-approval will give you an idea of what your maximum loan-to-value (LVR) ratio will be, which can help you decide whether or not it’s the right decision for you.
  • Be patient. You’ll need to wait until your home loan is officially approved before you can start construction, and most lenders won’t approve your loan if you’ve already started the project.
  • Seek advice. Before you apply for finance, it’s a good idea to seek advice to determine how much you can afford to borrow and whether or not you’re likely to be approved for a home loan application. Speak with a financial adviser and accountant to help with your budgeting as well as tradespeople or project managers before commencing.

How much can I borrow?

If you’re a licensed builder, you can generally borrow up to 80% of the construction cost for a full doc loan. If you’re not a builder, you can generally borrow 50-70% of the construction cost, so you might need sufficient savings or a gift from a family member.

Why is it so difficult to qualify for a loan?

Some lenders are concerned about lending to owner builders because of the likelihood that you may go over budget or not complete the build. However, if you’re a licensed and experienced builder, you may be seen as a less risky borrower.

How does an owner builder loan work?

If you’re approved for an owner builder loan, the lender will release the funds to you as progress payments rather than in a lump sum as it would with a standard mortgage. As you complete each stage of construction, a valuer will assess the work and then authorise the lender to provide the next progress payment.

What documents will I need to supply?

For an owner builder loan, you’ll need to provide more documentation compared to a traditional mortgage, such as:

  • A copy of your owner builder permit
  • Your project plan
  • A construction cost estimate
  • Your budget
  • A copy of your builder’s insurance

Compare more brokers in the table below

Data indicated here is updated regularly
Name Product Upfront consultation fee Variable rates from Comparison rates from Lenders on panel Apply Now
Aussie
$0
2.99%
3.02%
22
Aussie is a long-established mortgage brand with over 1,000 brokers across the country.
Finsure
$0
3.03%
3.04%
35
Finsure has a large panel of lenders and offers flexible mortgage solutions for borrowers.
loading

Compare up to 4 providers

Image: Shutterstock

More guides on Finder

Home Loan Offers

Important Information*
Logo for Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)
Westpac Flexi First Option Home Loan - Basic Variable Rate (Owner Occupier, P&I)

Up to $3,000 refinance cashback. A flexible and competitive variable rate loan. Eligible borrowers refinancing $250,000 or more can get $2,000 cashback per property plus a bonus $1,000 for their first application. Other conditions apply.

Logo for St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)
St.George Basic Home Loan - LVR 60% to 80% (Owner Occupier, P&I)

Up to $4,000 refinance cashback. A competitive variable rate loan from St.George. Refinancers borrowing $250,000 or more can get $4,000 cashback (Other terms, conditions and exclusions apply).

Logo for Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I
Athena Liberate Home Loan - 70% to 80% LVR Owner Occupier, P&I

A competitive variable rate mortgage for owner occupiers $0 application and $0 ongoing fees. This interest rate falls over time as you pay off the loan.

Logo for UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate
UBank UHomeLoan Variable Rate - Discount Offer for Owner Occupiers, Variable P&I Rate

Take advantage of a low-fee mortgage with a special interest rate of just 2.49% p.a. and a 2.49% p.a. comparison rate.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site