Building your dream? Compare owner builder home loans

Owner-builders, get financed: Construction loans made simple (but not for the faint-hearted)

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Sarah Megginson

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Key takeaways

  • Licensed owner-builders can typically borrow up to 80% of the property value, or up to 100% with a guarantor.
  • Owner-builders must provide plans, cost breakdowns, reports, and insurance to qualify for a loan.

  • Construction loans are disbursed in stages aligned with project milestones, with lenders requiring evidence of completed stages before releasing funds.

An owner-builder is someone who decides to construct their home themselves instead of contracting a licensed builder. Owner-builders who need a home loan can take out a construction loan, sometimes called an owner-builder home loan.

For most lenders, a key criteria for being approved for an owner-builder loan is certification as a licensed builder yourself. This is because they need reassurance that if they lend you this huge sum of money, you have the skills, expertise and experience to complete the project.

How much can owner-builders borrow?

A qualified owner-builder can generally borrow up to 80% of the property's value on a construction loan.

You could even borrow up to 100%, depending on the lender, if you have a guarantor and take out a guarantor loan. This is when someone is willing to offer their own property as security to back your loan.

Lenders are much more conservative if you're not a licensed builder. Most lenders won't lend you a dollar if you don't have proper certification; those that do, may only lend you up to around 60% of the property's value to minimise their risks.

What documents do owner-builders need to provide?

The specific documents vary lender to lender but generally you need to provide:

  • Council-approved plans. Your lender will need copies of council-approved building plans.
  • Cost details. This includes a detailed breakdown of construction costs, copies of quotes and estimates plus a payment schedule.
  • Quantity survey reports. You'll need a copy of your quantity surveyor's report and a soil test.
  • Insurance. Lenders require owner-builders to hold builders all risk insurance and public liability insurance.

How to maximise your chances of being approved

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.

Owner builder home loans

  • 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 do owner-builder home loans work?

Construction loans are different to standard mortgages. Rather than simply getting your loan approved and getting all the money at settlement, owner-builders receive funds in stages to cover various construction costs.

These stages are usually:

  • Foundations
  • Frame and exterior
  • Lock-up
  • Fit-out
  • Completion

The builder needs to provide evidence at the completion of each stage before the lender will unlock funds.

More helpful articles and guides

Frequently asked questions about owner-builders home loans

Sources

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Senior Money Editor
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Richard Whitten is Finder’s Senior Money Editor, with over eight years of experience in home loans, property, credit cards and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard started his career in education and textbook publishing in South Korea. He holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Bachelor of Education from the University of Sydney and a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise
Richard has written 755 Finder guides across topics including:
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Sarah is the author of How to Raise Rich Kids. With over 20 years of experience in property, finance and investment journalism, she is a trusted expert whose insights regularly appear across television, radio and print media, including Sunrise, Channel 7 News, Bloomberg and Yahoo! Finance. She has previously served as managing editor for Your Investment Property and Australian Broker. Her expert advice has been shared in the media over 4,000 times. Sarah holds a Bachelor’s degree in Communications and a Tier 1 Generic Knowledge certification, which complies with ASIC standards. See full bio

Sarah's expertise
Sarah has written 222 Finder guides across topics including:
  • Home loans
  • Personal finance
  • Budgeting and money-saving tips
  • Managing the cost of living
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