Advice for Owner-Builders: Get Finance Before Building Your Dream Home
It is a dream for owner-builders to build their very own new home. There is no greater satisfaction for owner-builders than to admire their new home. Building a new home requires great amount of work and money. Often owner-builders spend their money on the following things excavating their land and pouring the slab.
It is only after they have completed the above-mentioned work they realise that hey have run out of their own funds and have no money left to finish building their new dream home. This is when the problems start as they require finance for completing the project.
Can Owner-Builders experience Problems while getting Finance?
The short answer is yes. Owner-builders often realise that:
- Many banks do not like to lend money to Owner Builders, and if they do, they will usually lend around 50-60% of the value of the land plus costs (This is often not enough to cover the construction of their new dream home). They are often being loaned money by the banks for something that does not yet exist and they need to convince the banks that they can get the job done on time, and within budget.
- Generally you will need to approach a Private Lender for an Owner Builder Loan.
To avoid financial problems, you must prepare beforehand and start working on getting loan approval from lenders/credit providers.
Here is a list of things that you need to consider:
For an Owner-Builder Project:
- Funds are usually advanced in five progress stages
- Lenders will only pay out once each stage has been fully completed
- Before a stage is paid out, a valuer needs to sign-off on each completion stage.
Preparing your Building Project Documents
You should approach the building project in the same way as a building contractor would. This means preparing:
- Your professional “plans” and “specifications”
- A detailed and accurate building “cost estimate”
- A proposed “construction schedule”.
So, before you start excavating your land and pouring the slab, make sure you have your dream home completely designed, built and paid for, on paper.
Seek Expert Advice
Building your home is a wonderful and satisfying experience that can save you money. But, when things go wrong, it can take an immediate toll on your finances.