Owner Builder Construction Loans

Those who like to do their own home repairs, building, additions and renovations can save money by foregoing the work of a general contractor and obtaining owner builder construction loans. These loans enable homeowners to acquire the funding needed to perform their own home construction needs and research shows that homeowners can often save up to 20% by doing this work themselves. It’s important, however, for homeowners to realize that building their own home is a great undertaking and they must ensure they are prepared for the challenge. Never sacrifice quality and safety for saving money. Only build your own home if you are 100% ready, willing and experienced enough to handle the job.

There are both benefits and drawbacks to obtaining owner builder construction loans. The greatest advantage is the financial savings. The overwhelming reason why people choose to build their own homes is the financial savings. In addition to the savings of building your own home versus having a contractor do the work, you can save significantly on the cost of a new home. Those who build their own homes rather than purchasing a home new may find they save up to 40% in costs. For others, the idea of building their own home offers an overwhelming sense of satisfaction and pride. A home that has been built often becomes a special treasured possession that is passed from one generation to another.

Those who choose to build their own home will have a significantly smaller mortgage payment in the long run. This is one of the greatest benefits and advantages as it can prove to be a key to reducing overall debt and helping to establish financial freedom at an earlier age. Financial freedom has many benefits and can greatly enhance a person’s quality of life by removing stress, frustration and anxiety.

Building your own home creates instant equity as well. Those who buy a home often wait many years before they build enough equity in the home that they can refinance and borrow some of the home’s value. Those who choose to build their own home earn equity immediately, meaning they can instantly tap into those finances.

One of the greatest drawbacks to owner builder construction loans is that they can be difficult to qualify for. Many lenders view these as high risk and will charge additional or higher fees. Lenders like the assurance of working with licensed contractors so you may find that it is beneficial to hire a contractor to ensure that your loan application is approved. You can use a licensed builder to work as a supervisor of your home project. Be prepared to pay the contractor for his or her services.

You should also ready yourself to pay higher fees. Due to the risk involved lenders often charge higher fees for owner builder construction loans, however, even with the higher fees you can still expect to save more than you would if you bought a home new.

Owner builder construction loans are distributed as needed, which can help reduce rates as you only pay interest on the amount of the loan disbursed. You may find that your lender provides free workshops that will help you understand how financing works to ensure that you use the money wisely and in the most effective manner.

Speak to the lender about your options for repaying your loan. Lenders offer several options for repayment and some owner builder construction loans can roll over into a mortgage. This means that as soon as you are finished building the loan payments are automatically added to your mortgage payments. Other options include an interim loan that has its own rates. Speak to your lender about both options and determine which is best for your needs.