How do Owner-Builder Loans Work?

Owner-builder loans are loan products specifically designed to borrowers planning to build their own house. Unlike any other types of loans, these loans have specific requirements that every potential borrower needs to prepare. 

Building your own house or doing major renovations can be both stressful and overwhelming. Without any idea of this process, hiccups along the way can easily set off people from pursuing the project or worse, abandoning the construction in the middle of the project. 

These types of loans are popular among individuals or families who are wanting to build, renovate, or fix a portion of their homes.  

Eligibility 

Anyone who is looking to build their homes or doing renovations on a property can apply for any of these loans. Residents and non-residents of Australia may apply for owner-builder loans, but documentary requirements may vary for both cases. 

One must need to be at a legal age and has a stable source of income enough to afford the mortgage repayments and the deposit. General eligibility requirements vary from state to state. For example, in some states in Australia, owner-builder borrowers are required to live in the built dwelling and are barred from applying for other owner-builder loans within a five-year period. 

Paperwork

Just like any other loan, applications for owner-builder loans can be very stringent. Some of the basic requirements needed for these types of loans include the approved drawings or plan duly certified by local council or certifier/surveyor and then the bank’s valuer or a property surveyor.  

Borrowers are also required to submit documents showing evidence of income, assets, as well as liabilities. Depending on the type of loan you are applying for, some lenders may require additional requirements such as tax declaration or certificate of ownership of the collateral, if the case may be. 

For some obvious reasons, low-doc loans require relatively fewer documentary requirements,but are generally unavailable to Owner-builders. 

What to do next

Once you’ve made sure that you’re eligible for these loans and you’ve already secured all the required documentary requirements for your loan application, the next thing that you need to take into account is how to proceed. 

Reports indicate that lenders give preferential treatment to borrowers who are assisted by licensed builders or have a suitably experienced project manager . 

If you’re unsure of what to do and how to go about the processes, you can always consult mortgage broker professionals to work with you. These brokers will walk you through the process, help you gather all the needed documents for your application, and assist you in the entire loan application process. 
Intellichoice is a Brisbane-based mortgage broking company specializing in personal loans, home loans, and owner-builder loans. They’ve been at the forefront of mortgage brokerage service in the country for nearly 20 years.