Why Choose an Owner Builder Loan Over Other Loan Types?


Building a home is always a process. Between acquiring land, getting all the necessary permits, designing a home, and executing the construction plan, those individuals who look to build their own homes have a lot to deal with. With all of this on their plate, we here at Owner Builder Loans, LLC feel that the last thing a person needs to worry about when building their home is financing. While there are multiple loan options available to people, we feel that owner builder construction loans are the best choice for the vast majority of homeowners. In today’s post, we are going to go over some of the benefits of these types of loans and, in order to not appear too biased, we are also going to list some of the drawbacks.


Choose the Loan the is Best for You


When it comes to owner builder loans, there are several benefits that can make life easier for homeowners during and after construction. Below, we have listed the primary reasons that people consider going with this type of loan over other loan types.



  • Save Money: Perhaps the most popular reason that people choose to utilize owner builder construction loans is because this type of loan can allow people to save quite a bit of money on their home construction costs. Depending upon whether or not a homeowner does everything themselves, hires help, or enlists a project manager to help with construction, owner builder loans can save people up to 40 percent on construction costs associated with their project. Additionally, this  money tends to translate into a smaller mortgage, meaning that a homeowner will have smaller monthly payments. If an owner builder the chooses to put some of the money they saved during the construction process back into the mortgage of their home, they can drastically reduce the amount of interest that will have to be paid off later.
  • Instant Equity: When a person builds their own home, they are creating instant equity. This gives them the ability to refinance their home, take out a second mortgage on the home, or, if they so desire, sell the home once it is fully built. Normally, this amount of equity takes years to build up.
  • Control: Above all else, being an owner builder and obtaining a loan to construct a home provides a person with a level of control that is hard to replicate. Owner builders are given full control over the project, and are responsible for procuring all materials and coordinating builders and subcontractors. With this amount of control, owner builders can rest assure that their exact specifications will be met in the construction of the home.



As you can see, there are many benefits associated with owner builder construction loans. It is important to understand, however, that these loans also come with some drawbacks for certain individuals. While we here at Owner Builder Loans, LLC are huge proponents of our loan programs, we don’t want our readers to think that these are some magical loans that are all positives and no negatives. Below, we’ve listed some of the drawbacks to these types of loans.



  • Multiple Closings and Higher Fees: Because construction, especially of the home variety, is risky, lenders tend to charge more for owner builder loans than other loans of the same value. In addition to being more expensive than typical loans of the same value, most lenders will further protect their loan investment by requiring two closings from owner builders. The first closing must be completed before an owner builder breaks ground on their project and a second is required once the project is complete. It is also important to note that if an individual changes to a traditional loan at some point during the project, they may have to pay additional closing costs depending on the requirements of the lender.
  • Harder to Obtain: As a result of the housing crisis of 2008, owner builder loans have become harder to acquire. Gone are the days when loans were given out to nearly any person who applied for them. Lenders who offer owner builder loans tend to consider them to be high-risk loans and require some sort of certification in construction before they will even consider offering a loan to an owner builder. While the vetting process is more difficult than traditional loans, for the most part, the hoops are not that hard to jump through as long as you know what to expect.



We hope that this blog post has been informative and that all of our readers have learned a little more about the benefits and drawbacks of owner builder loans. If you would like to learn more about our loans and how they can be used as a solid investment strategy, please contact us today or visit our website. With decades of experience under our belts, we here at Owner Builder Loans, LLC are confident that our loans can help you make money.