Can I get a loan as an owner builder?

Managing your own build as an owner builder can save money and give you control, but it is one of the harder things to finance, because the lender is taking on more risk without a professional builder standing behind the project. Here is what to expect.

What an owner builder loan is

An owner builder loan finances construction where you, rather than a licensed building company, take on the role of managing the build. Because there is no builder providing a fixed price contract and the usual builder protections, lenders treat these loans more cautiously than a standard construction loan.

Fewer lenders offer them

Not many lenders offer owner builder loans, and those that do tend to apply tighter conditions. The pool of willing lenders is smaller, so finding one is itself part of the challenge, which is where matching to the right lender becomes important.

Expect a larger deposit

Lenders that finance owner builders generally require a larger deposit, meaning a lower maximum loan to value ratio, to offset the added risk. So owner building may save on construction cost but require more equity upfront, which is a trade off to plan for.

Permits and capability

Lenders will generally want evidence that you hold the relevant owner builder permit or approval required in your state, and may look for evidence of your capability to manage the build. The requirements around permits and experience vary, so it is worth understanding what your state and your lender expect.

Progress payments are managed carefully

As with any construction loan, funds are released in stages as the build progresses, and lenders manage this carefully for owner builders, often with valuations at each stage. Because there is no builder contract underpinning the costs, the lender pays close attention to whether the work matches the funds drawn.

Budget and contingency matter

Owner builders carry the risk of cost overruns and delays personally, so lenders want comfort that your budget is realistic and that you can cover a contingency. A well planned budget with a buffer makes the loan easier to arrange and the build easier to complete.

Match your project to the right lender

Because owner builder lending is offered by fewer lenders on varying terms, the useful step is to match your project to a lender that supports it. A broker who works with construction lending can identify suitable lenders and help structure the finance, usually at no cost to you. This is general information, not advice.