Construction Loans - Owner supplied/installed trades or items

Discussion in 'Loans & Mortgage Brokers' started by ncdev22, 11th Sep, 2023.

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  1. ncdev22

    ncdev22 Active Member

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    Planning for an upcoming significant extension (250m2) to our existing PPOR.

    To keep costs down, I would like to carry out a fair bit of work myself. I am a tradesman (although now work off tools), have a stack of long service and annual leave available and have carried out many renovations, but never something of this scale. I was on the tools as a Plasterer for over a decade and have also designed and installed multiple kitchens, laundries etc. Typically I will work with Cabinet makers who have a supply only service and I will design/install

    I have considered owner building, but finance is tricky in this area, and I would like to work with a small local builder, not necessarily be the builder.

    How does it work for the finance side of things if I have a contract for a builder for the bulk of the structural works, however supply and install the insulation, internal linings, cabinetry etc myself? Is this even possible?

    Obviously I can cost out the supply side, but would love some insight onto what would be required.

    Thanks in advance!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The lenders won't generally lend for these things.
     
  3. ncdev22

    ncdev22 Active Member

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    Simplistic view - If a fully costed turnkey contract was $500k, but then $100k of items were removed and owner supplied, would the a lender approve for $400k?

    The lender is then not providing lending for those items, but would the bank reduce the once-completed valuation?
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The lender will basically lend x% against the contract for the build and land value.
     
  5. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    doable but messy.

    Had a client that had all these items and more in the contract and did like 12 variations to remove them.

    Valuer signed off on the completed ho,e but we wont do another one like that - too much funding risk.

    ta
    rolf
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Lenders wont touch it and a licensed building is unlikely to touch it. Some builders will allow a client that is trade licensed to do specific works but will supervise it. They issue the sub-works contract to you for an agreed cost which isnt paid. The sale price is adjusted down. BUT most builders have low cost trades who do this work and work to allowances so the cost saving inst that significant. Assumes too they approve your product choices. And you will also need to be eligible onsite with your own w/comp and other insuance incl any assistance you need. If you are a sole trader that may not work. Whether it saves much is debateable. If you arent a carpenter / cabinet maker they are unlikely to allow this. No tiling, plumbing, electricals etc either Your difficulty is also that of scheduling to the builder timetable not when you want to do it. Then what happens if you get ill or injured ? The licensee is responsible for all works to code and all workmanship etc. Its only your house after handover.
     
    Last edited: 11th Sep, 2023
  7. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    How much usable equity do you have ?

    Maybe draw out the equity and do it with cash.