Finance - Show Me The Money…..
Owner builders can have problems arranging finance to build. Many lenders will not lend money to owner builders considering them a high risk. Owner builders don’t have the reputation of walking away but there is this perception from the lenders that this could happen and they are then left with a mess to try and fix. Builders don’t like taking on other peoples problems, they have enough of their own! Some money institutions will lend but you may need to have a minimum of 25% of the total land/build costs. They refer to this as an LVR of 75% (land value ratio).
ie. If the land (fixed) and house (estimated construction costs) value is $400,000 then they will lend you up to $300,000. (thanks Gerry for pointing out that accounting error).
If something goes wrong it is very hard for the finance company to get their money back. Additional inspection costs will be incurred even though money will only be paid to you as the job progresses.
You will have to provide detailed costing for the project which the lenders own quantity surveyor may inspect. You will possibly have to pay for this service, around $1500.00, and consequently be told your figures are incorrect. The lender will then not proceed until you can find more equity - a bigger deposit.
Some prospective owner builders may know a registered builder who is happy to sign for the job and call in now and then to see how you are progressing. He will however have to take out an insurance policy for the works and at the end of the day be responsible for the finished job so unless he is a good friend may not see the advantages of doing this for you. Many owner builders, particularly those with a trade may self fund the works getting mates in to help as they go.
There are financial institutions that will help you out there so persevere. Hopefully you will find a lender to suit your needs. Also check out the information below regarding the first time home owners grant, your lender may take this into consideration as it may help with your deposit.
- Click on link, contact Peter for further advice in Victoria.
First Time Home Owners Grant
Does this apply to Owner Builders? Yes it does.
Latest on the grants. Read this before the rest of this section.
The Australian Government has announced a First Home Owner Boost, which supplements the State Government funded First Home Owner Grant Scheme. According to the announcement from the Commonwealth:
- first home buyers who purchase established homes will receive a boost of $7,000 that will double the grant to $14,000
- first home buyers who build a new home or purchase a newly constructed home will receive an extra $14,000 to take their grant to $21,000.
First home buyers will be eligible for the First Home Owner Boost on contracts entered into from 14 October 2008 to 30 June 2009.
If you have never owned a house in Australia you may be eligible for a grant. Follow the links and have a read to find out more.
All states are currently offering $7000 grants with the exception of Victoria where an additional $5000 is available to eligible applicants. Other states offer stamp duty savings. Payment is generally made when you send in a copy of your certificate of occupancy so at least this will give you some money to pay of some debts or buy some furniture. Others may pay at lock up stage. Let us know if you have applied and at what stage you received the funds.
Follow the links below for your respective states. Updated 05/08. Contact your local state department for current information. This can be a complicated topic but dont be worried, generally your financial lenders will know how to claim this and what is available, if they dont ask you, ask them and follow up from the links below to make sure there hasnt been any additional grants made available. I have noticed that the VIC site hasnt been updated even though the regional grant was included a couple of weeks ago.
ACT currently $7000.00
http://www.revenue.act.gov.au/first_home_owner_grant
NSW currently $7000.00
http://www.osr.nsw.gov.au/benefits/first_home/general/fhplus/
NT currently $7000.00
http://www.nt.gov.au/ntt/revenue/pdf/F-HI-001.pdf
QLD currently $7000.00
http://www.osr.qld.gov.au/fhog/first-home-owner-grant/index.shtml
SA currently $7000.00
http://www.revenuesa.sa.gov.au/
Tasmania currently $7000.00
http://www.treasury.tas.gov.au/domino/dtf/dtf.nsf/v-fhog/home
Vic currently $7000.00 + an additional $5000.00 + $3000.00 regional grant
http://www.sro.vic.gov.au/sro/srowebsite.nsf/rebates_fhog.htm#2a
WA currently $7000.00
http://www.dtf.wa.gov.au/cms/osr_content.asp?ID=344
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