# Forum More Stuff Owner Builders Forum  Use Builder so bank gives me a loan, but I build, how to get the money to me?

## Earthling4469a

I am needing to use a bank for finance thus will be using a builder to tick that box, however the Bank traditionally gives 4 or so payments at different stages to the builder for work completed. I will be paying for all tradies and materials and organising all and using the builder for advice, approvals and part of the work...has anyone else done this and how did they get the money from the bank, rather than it going to the builder?

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## Cecile

> I am needing to use a bank for finance thus will be using a builder to tick that box, however the Bank traditionally gives 4 or so payments at different stages to the builder for work completed. I will be paying for all tradies and materials and organising all and using the builder for advice, approvals and part of the work...has anyone else done this and how did they get the money from the bank, rather than it going to the builder?

  I have been trying to figure out a way to do precisely this, however have been stonewalled all the way.  You would essentially be an owner-builder.  You may have a good arrangement (and a lot of trust!) with your builder, who could receive the progress payments on your behalf and then pass the payments on to you.  This may be fraught with problems for the builder though, because there may be tax implications for him. 
I hope you can get it sorted out.  Owner-building is not the bank's favourite way of lending unless you can demonstrate that you are already experienced in the industry. 
Good luck.

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## intertd6

One way could be to contract the builder on a "cost plus" contract. 
regards inter

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## JB1

Good luck. 
I had trouble finding a lender. 
In the end I maxed out the loan on my existing property and will have to borrow off family to complete the house (I'm say 75% done). 
Once house is finished I will take a mortgage on the house and repay the other loans.  
Sent from my iPhone 4S using Tapatalk

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## Earthling4469a

> One way could be to contract the builder on a "cost plus" contract. 
> regards inter

    Yes, I looked at those previously, but they charge anywhere from 8-20percent from my research and understanding...tooo much. Plus that equates them paying upfront for eveything and organising it all. Maybe 10k I would pay for the privilege of using their licence and me doing all, but not more.  
Unless I am missing something?

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## manofaus

You will be hard pressed to find a builder that will make a contract for construction of a dwelling and them let you source/employ/use tradies of your own, for two reasons.... 1/ they have to warrant the work of anything done to the house as part of the contruction (the bank needs a contract for construction) and 2/ they don't get the cream. 
The problem with banks, strangely enough, they want to be covered in case things go pair shaped. Hence the contract for construction.  If you want to handle the money, the only way to do it is to have the equity somewhere and the ability to repay the increased debt and do it as an owner builder. The if things go awry then the bank will sell your asset to recover the loss. If you have no equity then I severely doubt that you could do it at all.  
Financial institution's will lend for Owner building at a max of 60% of the finished building works. That is the land and cost of the construction as a percentage of the final sale price. you have to jump through alot of hoops but it can be done.  
You could get a builder to do the whole construction, try to get him to use the trades that you want to use in that contract, and could control the payments through a line of credit using equity that you have locked away. The contract from the builder will have payment schedule and they more then likely line up with what the bank would want in your 4 payment plan anyway. 
Please if you figure out a solution tell us!!

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## manofaus

that 8 - 20% would be eaten up by you paying a higher price for labour and materials.

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## Uncle Bob

Would setting up you own company work?

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## Earthling4469a

> that 8 - 20% would be eaten up by you paying a higher price for labour and materials.

    Not sure how that works if your a bargain hunter....so far nearly all suppliers agreed to give trade price, rest is from auctions. Electrician and plumber are not going to charge me that much more than the builder. Rest is labour by the hour. To lose $30000 plus as of higher charges you would have to be a mug I reckon.

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## johnc

> Would setting up you own company work?

   in a word 'No" 
As an owner builder the bank will not lend at all until you are at lock up, then you can apply for a loan and pay the trades as you go. At the moment you will find the banks are reluctant to lend and will be looking to see how organised you are.  
If you can provide solid security and have the income to meet the repayments you should be right.

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## Earthling4469a

> in a word 'No" 
> As an owner builder the bank will not lend at all until you are at lock up, then you can apply for a loan and pay the trades as you go. At the moment you will find the banks are reluctant to lend and will be looking to see how organised you are.  
> If you can provide solid security and have the income to meet the repayments you should be right.

  Very interesting. No banks or mortage brokers mentioned refinance after lockup. Are you a broker or can you advise me which banks do this?

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## Johning

I financed my first owner build by getting a line of credit from the bank. That way there are no restrictions on when you can draw down on the money to pay expenses and the money is not reserved for the build. Your financial circumstances will determine your likely success. I managed to get mine after a ten minute interview with the loans manager. I did have property that could be used as collateral but none was required.

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## Earthling4469a

> I financed my first owner build by getting a line of credit from the bank. That way there are no restrictions on when you can draw down on the money to pay expenses and the money is not reserved for the build. Your financial circumstances will determine your likely success. I managed to get mine after a ten minute interview with the loans manager. I did have property that could be used as collateral but none was required.

  Wow, with no collateral! Ive had line of credits before buy they always have used land I had as collateral. I asked a couple of brokers and both said no, unless you have collateral...even the two banks I went to said no. What bank you use? 
Just got off the phone from Rams and they ticked the most boxes so far:
-Full loan 80% LVR for block
-Low Doc Loan for Build through Builder, 80% LVR max-needs Mortgage insurance
-Doc signed by Accountant confirming income is all thats needed for income proof
-the 5 stages of drawing on the loan can be put into my bank account!
-5.6% 
Sounds too good to be true... 
I asked Re:refinance at Lockup Stage, but she said no banks will refinance then, it needs to be Council approved for refinance.

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## johnc

> Very interesting. No banks or mortage brokers mentioned refinance after lockup. Are you a broker or can you advise me which banks do this?

  The major banks will all do it, if you already have a loan on the block though you are up against it from the start. The bank will want first mortgage and it will not exceed what ever percentage equity it lends up to. What that may mean is that they do have a product but an individuals circumstances may not provide enough loan money to finish the job. If the land is fully owned when you commence loan negotiations then you should be ok.

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## Bloss

> I am needing to use a bank for finance thus will be using a builder to tick that box, however the Bank traditionally gives 4 or so payments at different stages to the builder for work completed. I will be paying for all tradies and materials and organising all and using the builder for advice, approvals and part of the work...has anyone else done this and how did they get the money from the bank, rather than it going to the builder?

  Not sure what you are asking. Either you are an owner builder or your builder is responsible for all works. All banks want to see and get a copy of the contract you signed with the builder. Payments are not automatic, but based on actual progress and there are milestones in a contract which must be passed and sighted by the bank before any payments are made. If you sign contract but then operate outside the contract then you will be in breach of loan conditions and fair chance both you and the builder would be in breach of approval conditions too. 
Seems to me like you need to have a good read of this site: Building Commission  and this doc to start with here and on insurance too Home Indemnity Insurance see what is the best way for you to proceed. 
What you are suggesting is not likely to give you a good result - it is a highly risky proposal to all concerned IMO. What you really seem to be after is to be an owner builder, but since banks are generally not as willing to make loans to owner builders you are looking for a workaround. Good luck with that . . . 
mmm - low doc loan = a loan to someone with a higher risk profile and that means higher cost to the borrower ie: you. 
Let's see: you are thinking of borrowing 80% of the land value, and 80% of the estimated build cost - so we assume you have the 20% remainder plus all other transaction costs (add another 10%)? What are your repayments if the loan goes to 7%, or 10% - more than likely in a 30 year period? 
Well I don't know what price you will pay, but on a $400K loan over 30 years @ 5.6% you'll need to find ~$2300 a month or $575 a week. If the rate goes to 7% then you'll be paying ~$2660 a month or $665 a week if it gets to 10% then ~$3500 a month or $875 a week. 
A $500K loan goes to ~$2870 a month or $718 a week on 5.6%, ~$3326 month or ~$832 a week on 7% and at  10%  ~$4400 month or ~$1100 a week. 
Feelin' lucky . . .

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## manofaus

> To lose $30000 plus as of higher charges you would have to be a mug I reckon

   
Im a mug then...  
Trade is different to Bulk.. 
I can get roofing at trade prices for $10 a metre.
If I go through my uncles business (roofer) he gets 45% and works out to be about $7 a metre.

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