# Forum More Stuff Owner Builders Forum  Financing the Owner Builder?

## Micky013

Hello owner builders, 
We (my wife and I) have hit a snag and its not a good one. 
We are currently renovating a 1905 Villa and have already gutted and started fixing the existing place. At the same time we have had approvals and plans drawn up for an extension and garage. I have an abundance of trade connections and family who have done developments. I also have significant ability in doing alot of the work myself and this led us down the OB road. 
The difficulty we are having is getting the finance to do this thing. With all the quotes and estimates we at about $150K to complete. We would only need to finance about $100 - $130K max but this is proving difficult to get as banks are only willing to lend 60% of the expected market value once complete. Our current mortgage is small but 60% wont cut it.  
It appears our only option is to get a builders contract so we can finance. We may be able to get someone we know to draw one up purely to get the cash but essentially it would be OB. 
We can easily service a decent mortgage so cash flow is not an issue. 
How do you folks get around this? I can see the reason why banks are tight on the OB but geez, you think you can do yourself a favor by buying a fixer-upperer house cheap and then you hit a wall.  
Maybe were doomed to just cough up 500K for something half as promising and live with it? 
Would love to hear your advice and opinions.
Michael

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## shauck

A chippy told me the other day, if you can get a guarantor for the loan, that's a way around it. I will be checking into this myself as I want to subdivide, sell the house (mortgaged) and build on the subdivision with a good chunk of the sale (banks) money.

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## SilentButDeadly

If the bank finds out you've already started the work then you are essentially knackered.  Your best bet is to check out a mortgage broker and get them to do the run around but I'll wager that you'll need to sort out a builders contract regardless. 
By the by...whilst I don't pretend that this is completely accurate...it is interesting Owner Builder Finance: Qualify For A Construction Loan

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## Micky013

Well i have just confirmed with ANZ that there are 2 options.  
1 construction loan - builder contract
2 get a guarantor 
My experience thus far leads me to believe that even though i have started renoing the existing structure, it will have no impact on finance. I haven't made any structural changes yet.  
Thanks for your feed back. At least there is another option besides a builder.

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## JB1

What I did was get a loan for 80% of the unimproved house value. 
Unlock the equity and use it to owner build a townhouse at the back.  
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## Micky013

JB1 - I dont think that would work in my case seeing as we have no equity in it? Sounds like a good way around it though. 
Plus, i think it would be worth less with the work i have done as its currently not habitable, Not that it was when we bought it but it did have a "toilet".

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## JB1

I thought that could work as you said your mortgage was small, and they will only lend 60% LVR of the complete project.  
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## JB1

> A chippy told me the other day, if you can get a guarantor for the loan, that's a way around it. I will be checking into this myself as I want to subdivide, sell the house (mortgaged) and build on the subdivision with a good chunk of the sale (banks) money.

  I had issues with this as it was a
Catch 22 for me. 
I couldn't sell the front house without subdividing the property. 
I couldn't subdivide the property until I built the rear property. 
I've completed my rear house and got Cert Occupancy, so I will apply for subdivide the property once I complete the landscaping (part of council subdivision requirements).  
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## Micky013

Yes it is a small mortgage but sadly 60% of the completed MV isnt even enought to refinance the existing loan ..... I think first attempt is to contact a few builders we know and see how we go getting a piece of paper for the banks..

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## shauck

> I couldn't subdivide the property until I built the rear property.

  Really!! Never heard of that before.

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## JB1

It may be different for you, but it was my council requirement for the house AND landscaping to be completed before I can subdivide it.  
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## shauck

> It may be different for you, but it was my council requirement for the house AND landscaping to be completed before I can subdivide it.  
> Sent from my iPhone 4S using Tapatalk

  Wow. That's insane. It forces you to either be extremely cashed up or risk a big mortgage and not even know if you can sell the first house yet. That would stop me in my tracks. As if it's not hard enough.

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## dmh070

Hi mate, 
I'm a mortgage broker and though I haven't done an owner-builder for a while IM pretty sure you can get 80% of the property value from NAB. I would give them a try. ANZ is not the go. It may be tricky if you are halfway through as a lot of lenders do not like taking over incomplete constructions, but as far as the major banks go NAB is probably your best bet. If the place is gutted they may only give 80% of land value. You want to be careful what you say to them as you might say something they wouldn't want to know.    

> Hello owner builders, 
> We (my wife and I) have hit a snag and its not a good one. 
> We are currently renovating a 1905 Villa and have already gutted and started fixing the existing place. At the same time we have had approvals and plans drawn up for an extension and garage. I have an abundance of trade connections and family who have done developments. I also have significant ability in doing alot of the work myself and this led us down the OB road. 
> The difficulty we are having is getting the finance to do this thing. With all the quotes and estimates we at about $150K to complete. We would only need to finance about $100 - $130K max but this is proving difficult to get as banks are only willing to lend 60% of the expected market value once complete. Our current mortgage is small but 60% wont cut it.  
> It appears our only option is to get a builders contract so we can finance. We may be able to get someone we know to draw one up purely to get the cash but essentially it would be OB. 
> We can easily service a decent mortgage so cash flow is not an issue. 
> How do you folks get around this? I can see the reason why banks are tight on the OB but geez, you think you can do yourself a favor by buying a fixer-upperer house cheap and then you hit a wall.  
> Maybe were doomed to just cough up 500K for something half as promising and live with it? 
> Would love to hear your advice and opinions.
> Michael

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## Micky013

> Hi mate, 
> I'm a mortgage broker and though I haven't done an owner-builder for a while IM pretty sure you can get 80% of the property value from NAB. I would give them a try. ANZ is not the go. It may be tricky if you are halfway through as a lot of lenders do not like taking over incomplete constructions, but as far as the major banks go NAB is probably your best bet. If the place is gutted they may only give 80% of land value. You want to be careful what you say to them as you might say something they wouldn't want to know.

  
Hey, 
Thanks for the feedback. I spoke to one of the managers of the city branch who advised me that they only do 60% for owner builder. Got this guys contact through my work as we make a lot of arrangements for clients using NAB. He said he went on to check the fine print of financing arrangement and i did say something about 80% for owner builder but he wasnt going to guarantee that for me. He spoke to one of their on the road lenders and he said its strictly 60%. 
Although i am aware that ANZ may not have been the best bank to go with, were pretty set on the guarantor option. I cant be stuffed with a builder and all the going round in circles just to get the cash and i cant be stuffed changing banks if we just gonna guarantor it.

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## Micky013

Forgot to mention - we haven't actually done anything to the house that would be detrimental to the financing arrangement. At worst, we could fix it as is and move in. All the work we have done is basically cosmetic in nature. 
The idea behind going the guarantor option would be to refinance our mortgage (possibly with another bank) once the extension is complete and free the guarantor from the loan.

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