Owner Builder Loans: How it Works, Benefits, Things to Consider

Owner Builder Loans - How it Works, Benefits, Things to Consider

Owner Builder Loans: How it Works, Benefits, Things to Consider

Owner builder loans are hard to get. This is because owner builders are generally thought of as high-risk borrowers by banks and loan companies. In any event, an owner builder loan can help you get much-needed funds for your project. Below are a few primers to help you understand the type of loan more and get you through the process.

How An Owner Builder Loan Works

Owner builder loans are not like regular mortgages. If you get approved, the fund won’t be released to you as a single lump sum. Rather, it will be given to you in increments as your project progresses. Each time a stage of your project is completed, an inspector from the firm will check the quality of the construction, your timetable, and your budget’s status. This way, they can be reassured that the money they are lending you are going to the right things.

How To Apply For Owner Builder Loans

Loan companies will ask for certain documents for owner builder loans to be approved. These are:

  • Your builder’s permit (or a copy of it)
  • Your budget and its proposed breakdown
  • Your project plan
  • A copy of your builder’s insurance
  • A clear construction cost estimate

If you are an owner builder without any prior experience in building, the amount you can borrow will range only from 50% to 70% of the total construction cost. You can get a bigger loan if you are a licensed builder or have the supervision of a licensed builder. Generally, licensed builders can get approved for up to 80% of the total construction cost.


Getting owner builder loans for a chance to build your own house can be challenging but the troubles are all worth it. As an owner builder, you will be able to save more money because it is always easier to build something from scratch than to modify a previously existing structure.

Also, as an owner builder, you will not have to settle for constructions that are below your standards. During the construction phase right up to the finishing touches, you can enforce your own standards, be hands-on with the project, and know for sure that the money you are investing in the project is going to the right things.

How to Stay Focused And Finish Your Project

The biggest challenge for anyone who gets approved for owner builder loans is to sustain the project. You must be careful not to overspend at any phase of your construction. From the very beginning, hire a trusted financial adviser to do the costing with you. You should have a 15% buffer just in case there is inflation during your construction period, or you would have to extend because some parts of the project did not go as planned.

You must always have room for delays and you must be prepared for them. Generally, house constructions take a minimum of 25 weeks. You must be prepared to spend more time and money on the project just in case modifications are in order. You must also look into your paperwork. Read your permits well, make sure you abide by the terms and conditions and make sure you are not spending more money on unnecessary things especially if your loan approval depends on it. Keep a strict watch over your time table.