Getting an owner builder finance home loan

If you are considering becoming an owner builder and project managing the construction of your new home or major renovation, make sure you are fully prepared for the owner builder finance or construction loan process.

Below are some things you should take into consideration if you are thinking of becoming an owner builder and applying for owner builder finance.

• Don't rush through your planning phase in an effort to get to the actual construction of your home. Many owner builders have made this mistake only to run out of money with a half-built home or do not realise the full costs of being an owner builder.

• You need to understand that the planning and financing stage is just as important as the actual construction phase.

• Don't rely on a cost estimator to put together your budget for your new home construction or renovation, as it won't be accurate enough. Set out your owner builder budget and get quotes for everything so you are clear on the full costs of owner building your home. If you are using the owner builder system to build your new home, the quotes booklet lets you get quotes for everything so you can easily compare it apples to apples.

• We strongly recommend that you take the time to put a solid budget together, based on actual quotes from local sub-contractors and material providers. Make sure you base these quotes on your actual blueprints so you can do a proper comparison. If you are using the Home Building System (HBS), you can get the contractors to do a breakdown of the costs and materials needed so you can compare with other quotes.

• Don't try to build the biggest house in the neighbourhood. Your construction loan's appraisal will most likely be inadequate to get the file through underwriting, because there won't be any comparable properties in your neighbourhood.

• Make sure you understand the construction appraisal process and requirements before you finalize your house plans and/or select your land. If you can't get a solid appraisal, you may not be able to get an owner builder finance or construction loan approved.

• Get an owner builder home loan that has a single closing to cover the land purchase, construction phase, and conversion to permanent financing.

• Please note that it may be difficult to secure owner builder finance if you have poor credit history. The lending criteria for construction loans are stricter than normal residential home loans, as the mortgage lenders don't have assurance of a completed home in the event of default or repossession. If you have bad credit history, we recommend that you first look at repairing your credit profile and put a savings plan in place before you owner build. The mortgage brokers at Intellichoice can provide you with more details on how to get started.

• Don't start building or renovating your home until your owner builder loan has been confirmed and closed.

• Don't hurt your credit score while you build your own house by running up credit card debt or missing home loan repayments because you are strapped for cash. Ensure you have enough funds for everyday expenses while renovating or building your home.

If you want to become an owner builder, follow these tips so you have an idea on what it means to be an owner builder and some of the hurdles you may have to face trying to get owner builder finance. If you would like more information about owner builder finance or the owner builder system, speak to one of the mortgage brokers at Intellichoice on 1300 55 10 45.

Common oversights during home construction as an owner builder

Timber floors

If you are laying a wooden floor in your home, pay special attention to the sub-floor ventilation. Any dampness trapped under the house will rot out the bearers, joists and the wooden floor itself. Adequate ventilation by way of vents is required and always ensure these are not blocked off by garden beds or paving.

Electrical, Data and Telephone Wiring

The best time to install electrical, data and telephone wiring is at the framing stage. The electrician will need to rough in the wiring and fit base plates. The data and telephone cabling should be fitted at the same time. Try to fit wiring after plastering will prove difficult and expensive.

Sit Set Out

No construction can begin until the site has been set out. All lines must be square and correctly aligned to the boundaries. While experienced contractors and builders can do this, an owner builder is advised to utilise the services of a building surveyor. Mistakes at set out will become evident during construction and may end up becoming a disaster if not corrected and rectified early on.

Brickwork

If using bricks in the construction fabric, choose them carefully. Clay bricks come in many varying shapes and sizes. Concrete bricks come in plain or coloured and may be the better choice if painting, bagging or rendering.

Bathroom

Wet areas require special attention. Water leakage from the shower constitute approximately 80% of building complaints and can cause rotting. Ensure your plumber has correctly sealed shower bases and other fittings. Use CSIRO approved membranes - a list is available from the CSIRO website.

Concrete slab

If your construction method incorporates a slab on the ground, the correct waterproof membrane fitted beneath the slab is vital and mandatory. Be sure to have the membrane turned up around the edges of the slab and protected from the UV rays of direct sunlight. Without a correctly fitted membrane, the slab would never fully dry out resulting in dampness problems, particularly to floor coverings.

Delivery of materials

Materials delivered at the wrong time can cause problems. It too late, delays will occur. If materials are delivered too early, you may need security against theft or wet weather. Deliveries need to be carefully scheduled to coincide with the trades on site. Discuss material needs and timing directly with the individual trades.

Drainage

It is very important to keep moisture away from the construction. Once completed, the house will need a hard surface around the base to divert water away from the building. This can be made from concrete or paving and care should be taken to ensure the skirt slopes away from the outside of the house.

Records

Keep records of all labour and materials payments for good taxation and budget control. Written records of any instructions or variations to tradespeople or contracts will help reduce the likelihood of disputes. Remember to get the tradespeople or supplier to sign a copy of any written agreement.

Footings

Footings will be the first structure installed in the building process for houses with timber floors. Footings are reinforced concrete poured into prepared trenches and it is the responsibility of the owner builder to ensure that the trenches are the correct depth, width and that the trench sides/floor are straight and level. Trenches are usually dug by an excavating machine and may need to be finished up by hand.

Inspections

As the owner builder, it is your responsibility to arrange the building inspector at the critical stages. Inspections are usually required at the footing, framing and final stages. Contact your local council or building surveyor at the permit application stage to confirm which and when inspections are needed and program them into your schedule. Mandatory inspections do not cover every part of the construction process. It is strongly recommended you engage a building inspector to conduct extra inspections to ensure the works are up to industry standards.

Material storage

The materials purchased for the project are expensive, so it stands to reason that protecting them is a crucial part of your planning process. Materials left out in the rain will weather and if not stacked correctly, will damage or get in the way if left lying around. If vulnerable materials have to be left outside, consider building a shed to house them or cover them effectively with weatherproof tarpaulins. Theft of materials from job sites is a major industry problem. Never leave valuable tools or items exposed and if possible, keep them under lock and key.

On-site services

Electrical power and temporary toilet facilities are required during the entire construction process. Arrange for the early supply of temporary power facilities and a portable toilet for all workers. These can be hired from specialist hire companies.

Housekeeping

Site cleanliness and maintenance are serious occupational and safety issues. Keep the building site free from off cuts, broken and excess materials, wrapping and rubbish. Most building projects will require up to 6 large rubbish skips for rubbish removals. Proper housekeeping will reduce the risk of injury and increase the productivity of all workers and contractors on site.

Variations

It is the responsibility of the owner builder to ensure the construction follows what is allowed in the building permit. Variations are allowed, but these will need to be referred back to the authority that issued the building permit. This should be done in writing, explaining the changes and accompanied by a clear diagram of the variation to the building plans.

For more information about owner building or if you require owner builder finance, speak to the mortgage brokers at Intellichoice on 1300 55 10 45.

Building green habits into smart design

Sustainability is not only about a reduction in consumption, for the owner builder, it is also about improving efficiencies via an integrated and co-ordinated approach to building. By incorporating design, construction and the operations of any home, apartment, facility or business into the building plan, you will be well on your way to reducing your environmental footprint and improving occupant comfort.

The trick, when all is said and done, is to ensure that you incorporate these measures into your daily routine, commit to them and make them habitual, because when you build a new home or start a major renovation, you should be planning for minimum energy and resource usage.

Good energy efficient design, materials and products, are readily available; they may look more expensive, but the right product can pay for itself in a remarkably short space of time.

So, if you are interested in reducing your footprint, keep in mind the following issues:

Energy smart design

Achieving the right orientation between design and house sitting will effect the zoning and relationship of internal spaces, the placement of windows, the layout and location of major outdoor features including planting for sun-shading and wind screening.

Solar access

Solar access refers to the amount of sun available to a building and means reduced energy needs, improved comfort levels and environmental benefits. Smart orientation achieves a high level of unobstructed winter sunshine in cooler climates and minimises exposure in warmer areas.

Windows and cross-ventilations

Correct size, orientation, glazing treatment and internal coverings have a significant impact on energy efficiency and comfort. Incorrect window choices or applications may result in a home that is uncomfortable and expensive to run. Controlling the air movement through the home is another factor in minimising the need for supplementary heating and cooling. Adequate ventilation ensures good air quality within the home.

Roof and wall insulation

Effective insulation is the best way to improve the energy efficiency of the home. Insulation of the building helps retain heat during winter and release it in summer. Insulating the home can save up to 45-50% of heating and cooling energy while improving the living conditions for occupants.

Landscape design

Effective landscaping is an easy and inexpensive way to improve the energy performance of the building. A good landscape enhances the appearance and value of the property and provides screening. Select plants that can be strategically positioned to shield against wind and sun. They can also be used to reduce glare and cover exposed ground to reduce moisture loss.

Climate change affects each and every one of us. It demands that we take a sustainable approach to the way we run our lives and businesses. We must reduce the level of waste, inefficiency and pollution we have come to take for granted – that is smart business. And as the cost of irreplaceable natural capital increases, it will make even more business sense. When you consider that over 80% of all buildings in Australia are incorrectly designed for their climate, improving the design and therefore comfort of any structure should be first and foremost in the owner builder's mind.

Do you want to make 9 percent returns on a property with minimal effort

Renovation will be further fuelled by the historic low interest rates, making cheap money available to fund renovations and increase returns in the long term. For many cashed up baby boomers, the renovation of the family home is a way to substantially increase their wealth by investing in the family home, which becomes a tax free investment when it is eventually sold. In addition, with a quarter of Australia's population expected to be 65 or more by 2047, renovation will become an important national wealth creation strategy as a way to increase equity in the family home and boost retirement funding.

Research shows that most people (90%) who undertake home renovations, do some of the work themselves and most (70%) do so to save money. Despite careful planning, four in ten renovators (43%) find their renovations end up being more expensive than they thought, while 49% find unexpected jobs occur throughout the process. In addition, the survey also found that around 58% of home renovators found the renovations stressful and almost 1/3 found the renovations to be a source of tension between themselves and people they live with.

However, it need not be stressful when using the home building system, which saves you time, money and hassle by taking you through the whole process of project managing your home renovation from start to finish, so there are no unexpected surprises during your home renovation and if you do decide to use a builder, you could ultimately save up to 50% off the cost of major renovations.

There are huge savings to be made. One of our clients used the owner builder system to renovate her home and then sold the family home 12 months later for a profit of $158,000 on top of the $58,000 savings she made just by using the home building system.

For more information on how you can use the owner builder system to renovate your home and make yourself 9-10% returns on a property with minimal effort, speak to one of the mortgage brokers at Intellichoice on 1300 55 10 45.