Insurance/Financing for alternative building methods

Anyone have any insight on challenges one might expect when attempting to secure a loan or insurance for any of these building methods?

I have no experience trying to secure a loan for any alternative building methods.

My suggestion would be to talk with the loan officer where you do your banking.

I would also suggest narrowing down your choices to one method when approaching the loan officer.

Take your blueprints, a picture of what the finished dwelling would look like, and any other information that would help win the loan officer over.

I would suggest doing the same with your current insurance company if you will need a builder's risk policy.

Good advice, thank you. I'm really hoping to hear about what kind of challenges people have faced first-hand, though. I see so many cool buildings on here, but I find myself wondering if the builder struggled with that stuff. I just hope to get some idea of what to expect before I spend days on end talking to lenders and insurance agents.

I have a couple of points for consideration;
- Consider a personal loan instead of a housing loan
 If you are self building often you just need cash to start particular parts. IE concrete slab or steel posted roof structure.
 Then you start walls etc, paying off the smaller loan at the same time.
- Can you live with no insurance?
 If you build clever it will not burn down

John brings up a great idea.

Get a personal loan or refinance something you already have.

That way the hassle has been eliminated and so has the insurance bit if you can self-insure.

If there are any folks in your area that have built something like you want why not talk to them?

Another suggestion is that there may be books on the building method that you are interested in that might offer suggestions on how to finance and get insurance.  Librarians are usually knowledgeable about the books the library has so why not stop at your local library?

Before getting the insurance/financing, I had to show that I had a plan. If you know where you want to build, get a copy (usually online) of the building code for the county, city or village. Alternative methods in one place are not alternative in other places. Where I live, people have been building with adobe, mud, cob, turf, and other "alternative" materials for hundreds of years. The codes spell out what is necessary to get a building permit for those materials and what must be included in plans, inspection schedules and so forth. I had to present my plans to planning and zoning and they gave me lots to think about before giving the "okay" to purchase a building permit. With permit in hand, getting a loan is more straightforward.
Before interviewing for the loan, I could show the plan and the approval of planning and zoning. To make the process easier, choose an "alternative building method" that has some historical precedence in your area. People at the local historical societies are a goldmine of information, connections to experts, and unexpected resources.

I think in the big scheme of things, while financing may seem like the ideal situation, in the end it actually may rob you of some really good experiences.

One trend you will notice on this alternative housing is there low costs, and that is for a reason. There is a primal need for housing, but it does not have to mean you go in debt to get that housing that is needed. At looking at it from a different perspective, you not only get a self-build home where you have a huge amount of personal investment into it (also called sweat-equity), but you also come out on the other side owning it outright.

It really does not matter what type of house build we are talking about here: WOFATI, Earthberm, Container, Cordwood, or how I built mine, timber frame but using 90% of materials I found on the farm. Material costs are reduced so that as the house has aspects of it that are completed, it is owned outright as you go along. And if you own it outright, you don't need insurance.

But acquiring the material needed at such a low cost that a loan is not needed is a skill-set and experience all on its own. It takes looking at things from a different point of view. Just as an example, what happens if I bought a two acre house lot because it is all I could afford, but there is not enough trees on it to build a cordwood home? Well, I would probably use earthcrete to make a slab for my house first which only requires buying a few bags of portland cement and mixing it with existing earth. Then I might go to a firewood dealer and have a few cords of tree length firewood delivered. A cord of wood would make a lot of walls and yet only cost me $100. I could probably find free windows somewhere, and then buy rough framing lumber, rough sawn boards and finally buy new or used steel for the roof.

The point of all that is NOT to say how to build your home, but show that by attacking the problem from a different point of view, you can make your home. I mean who would ever think to buy tree length firewood to put up walls for a house? You need a lot of trees on your land right? Nope? You need a sawmill to make boards right? Nope, just a chainsaw if you have a cordwood home. The point is, why waste your time trying to secure financing to people who do not care about your home. In the same amount of time as you trying to convince people to lend you money and insure the loan, you could have built a small home for you and your family out of pocket. You do not have to write a check for it, and when you do as much as you can for yourself, you actually own it, and are not subjected to societies rules like insurance. (I don't have homeowners insurance). Is there risk? Sure, but The Greater the Risk, the Greater the Reward too. Some have said I am fearless, and that is NOT true, I just have confidence in myself, but part of that has been from providing for myself for years.

Today it is sad, jump on many forums today and ask a simple question and 19 out of 20 people will tell you, "Oh you cannot do that". What I love about Permiculture is that you will be inspired to do things differently. In the end, building your own place will rid you of the one thing that trips so many people up today, instant gratification. But rid yourself of that, and the world is your oyster. A lot can be accomplished when a little is done often.

We found it difficult in 1993 to secure a loan on a strawbale dwelling. Construction insurance was problematic as well. We ended up with a stick built house. Currently ADU's (accessory dwelling units) in our county are not allowed, but that is scheduled to change in 2023. So the property I live on I can't build a strawbale structure on now, even though I have the equity to do so with the house being paid off. If the rules change I might get a strawbale dwelling in the end on the other side of our lot. Hopefully things have changed and for you it will be easier. We probably could have built an alternative house on our own without financing but the project would have taken longer. We did a lot of the interior ourselves, wood flooring, tiles, trim, doors, cabinets, plumbing fixtures and lighting. Even with just that part of the building of the house it was a test in the strength of a relationship for us. We have a beautiful home and I'm still alive.

Ray, that is a good point
" it was a test in the strength of a relationship for us"
Self building is stressful and I often advise people to allow 3 yeras and take time to nurture the relationship it may get hammered.
Just think about how often a builder is asked to make changes to the original plans.
In Bendigo they charge $1500 to make a change and then the cost of the change, each time.
I have heard of people with 15 -20 Changes.
I think it is an Ego thing, but an expensive one at that.
Thats $30,000 plus the cost of the change.
Madness.
So imagine having a partner change their mind when you are self building a small house on a budget !!!

It is one thing I do love about where I live: NO BUILDING CODES.

We have environmental laws, and set-back rules so that you cannot put a house on the property line, but our town chose not to adopt the national building code so anything goes. Want to build a WOFATI... go for it. If you want to live in a school bus? Who are we to stop you? It really came down to building material. Here we build a lot with rough lumber since many of us have sawmills and woodlots. The National Building Code requires lumber to be boughten, or stamped since it is tested. A lot of people around here were really against that since many of us make our own lumber. Just because we do not test a 2x4 by breaking it every 1000 boards does not mean our boards are weak.

It even got really bad one year when someone from away tried to make a rule where you had to have smoke detectors in a house. Since we have so many Amish here, and they don't believe in that sort of thing, a bunch of us went to bat for them and got that silly building rule voted down. I know the woman meant well, but jeesh do we really need a rule for that sort of thing?

All the rules here are printed on one 8-1/2 by 12 sheet of paper at the town office. I think there are 12 stipulations, with it costing $50 for a new house permit, and a $20 permit if you put an addition on an existing house. We are not alone though, most towns around here don't have building codes, but why should they. You are living under it; it really is in YOUR best interest to build it safe enough.

Where do you live Steve

Hi Elizabeth,

Welcome to Permies.

Thanks for all the great input and advice!

But there are a couple areas where I'm having trouble making a connection: how do you acquire land, tools, and materials; learn to, design, plan, and actually build your own house out of pocket? And if you're spending all your time working on your house, how do you make money to pay for things like the land, materials, and property taxes on that house; a place to live while building the house; property taxes on THAT property; food, health insurance, vehicle, vehicle insurance, vehicle registration, gas, retirement, life insurance, other basic necessities, etc.? And if you're not working to make money to pay for these things, how do you pay for them?

The math is just not adding up for me.

Another thing in response to the advice against having homeowners' insurance: it seems inadvisable because if something was to happen (fire, flood, wind, hail, [all of which are evidently becoming more common]) I would have no way to rehome my family without becoming a major burden on somebody.

I really don't mean to be negative; I'm just struggling to see how all this is possible. The least amount of money required to acquire, maintain, and pay for property and property taxes on the minimum possible acreage; and build the most basic, inexpensive house possible would still cost tens of thousands of dollars - at least here in SE MN. And it would take a lot of time (months? years?) that I'd be spending doing that instead of working for income, so I'd be spending many tens of thousands while not making anything.

It seems like one either has to have A) a source of passive income, B) a big inheritance, C) a lot of money saved, or D) be willing to risk foregoing insurance of any kind, a vehicle, a proper house while building the new one, comforts of any kind. But this still doesn't account for a lot of unavoidable expenses like food, clothing, basic necessities, medical emergencies. Is this an accurate analysis? Is there another way? Am I not seeing something?

Again, the math isn't adding up. Can anyone give an example of rough numbers in their specific case?

Example: "It cost me X amount of money in X amount of time to build X with X tools". Details about what kind of necessities/conveniences you did/didn't have during that time would be a big bonus. That would be a great way for me to picture how feasible it would be for me and how much I'd need to save before getting started if I'm to do it without a loan.

Thanks again for all your great input!

Steve Zoma wrote:I think in the big scheme of things, while financing may seem like the ideal situation, in the end it actually may rob you of some really good experiences.

One trend you will notice on this alternative housing is there low costs, and that is for a reason. There is a primal need for housing, but it does not have to mean you go in debt to get that housing that is needed. At looking at it from a different perspective, you not only get a self-build home where you have a huge amount of personal investment into it (also called sweat-equity), but you also come out on the other side owning it outright.

It really does not matter what type of house build we are talking about here: WOFATI, Earthberm, Container, Cordwood, or how I built mine, timber frame but using 90% of materials I found on the farm. Material costs are reduced so that as the house has aspects of it that are completed, it is owned outright as you go along. And if you own it outright, you don't need insurance.

But acquiring the material needed at such a low cost that a loan is not needed is a skill-set and experience all on its own. It takes looking at things from a different point of view. Just as an example, what happens if I bought a two acre house lot because it is all I could afford, but there is not enough trees on it to build a cordwood home? Well, I would probably use earthcrete to make a slab for my house first which only requires buying a few bags of portland cement and mixing it with existing earth. Then I might go to a firewood dealer and have a few cords of tree length firewood delivered. A cord of wood would make a lot of walls and yet only cost me $100. I could probably find free windows somewhere, and then buy rough framing lumber, rough sawn boards and finally buy new or used steel for the roof.

The point of all that is NOT to say how to build your home, but show that by attacking the problem from a different point of view, you can make your home. I mean who would ever think to buy tree length firewood to put up walls for a house? You need a lot of trees on your land right? Nope? You need a sawmill to make boards right? Nope, just a chainsaw if you have a cordwood home. The point is, why waste your time trying to secure financing to people who do not care about your home. In the same amount of time as you trying to convince people to lend you money and insure the loan, you could have built a small home for you and your family out of pocket. You do not have to write a check for it, and when you do as much as you can for yourself, you actually own it, and are not subjected to societies rules like insurance. (I don't have homeowners insurance). Is there risk? Sure, but The Greater the Risk, the Greater the Reward too. Some have said I am fearless, and that is NOT true, I just have confidence in myself, but part of that has been from providing for myself for years.

Today it is sad, jump on many forums today and ask a simple question and 19 out of 20 people will tell you, "Oh you cannot do that". What I love about Permiculture is that you will be inspired to do things differently. In the end, building your own place will rid you of the one thing that trips so many people up today, instant gratification. But rid yourself of that, and the world is your oyster. A lot can be accomplished when a little is done often.

I should say that this is great stuff and does help answer a lot of those questions. But there are still pieces missing for me. Cost of land, tools, taxes.

All of your input really is helping this idea come together for me, albeit a little slowly. Actual numbers and examples are my best teachers, I think.

I would have a hard time putting a cost on a project with out having at least a set of plans or detailed discussion on what your dream home is.  Are you going to do it in sections as money allows? Pricing property another problem you might come across an incredible deal. Are you starting from zero with no tools? Time? Share with us your construction skill level. Watch a video on Pronneke is that what you imagine? Minimal tools minimal cost of materials. A yurt? a geodesic dome? Both easily constructed and minimal skills and tools required.

Sam you are asking a question that is impossible to answer.
I think everybody learns the answers by watching, reading and being aware at properties.
I am 73 and watched my family build an extension at about 3 years of age, then over time built cubbies, sheds and finally a number of houses.
I trained as a Civil Engineer and moved in a different direction.
I ran a demolition business for a while so I leant construction techniques and I kept reading and tinkering.
All, the time collecting tools.
I have no idea what I have spent on tools.
I can say I paid $3000 in 1972 for 10 acres of land.
The basics for my home cost $10,000 in about 1983

I suggest you spend time helping people do things and ask questions on site.
If you worry too much you will surely not make a start.

What type of alternative house are you considering? Strawbale, cob, cordwood, rammed earth? adobe? earthship, log, tiny, yurt ?
What can you scavenge? A geodesic dome? Get a side job cleaning construction sites. The triangle panels could be made from cutoffs and you could slowly build an inventory of the structures components.

Steve, in Australia, whether we like it or not we seem to have a national requirement for building to code.
I am in a remote area and do ok, but I would not bet on it.
There is an argument put by others if you want to sell your property " building code requirements" protect future purchasers.
I guess the alternative maybe that if you build will nilly, you dont have a right to charge for 'improvements' unless the purchaser agrees to it with out any guarantees.

Sam Benson wrote:But there are a couple areas where I'm having trouble making a connection: how do you acquire land, tools, and materials; learn to, design, plan, and actually build your own house out of pocket? And if you're spending all your time working on your house, how do you make money to pay for things like the land, materials, and property taxes on that house; a place to live while building the house; property taxes on THAT property; food, health insurance, vehicle, vehicle insurance, vehicle registration, gas, retirement, life insurance, other basic necessities, etc.? And if you're not working to make money to pay for these things, how do you pay for them?

The math is just not adding up for me.

Work hard at your job so that you are a success and get lots of raises.

Save your money to support your dream.

Decide what kind of alternative housing you want to build so that the folks on the forum can point you in the right direction.

Resources:  Books and workshops.

Concise advice! Thank you!

Raises don't apply to me since I'm self-employed, but point taken. But I'm really trying to figure out how MUCH to save.

I'm 90% sure I want to build a timber frame, depending on the cost. I have purchased a few books on the subject, watched a few videos -although good ones are scarce - and I'm planning to attend a workshop next spring in Northern MN at the North House Folk School. Really cool looking place! I really can't wait! Unfortunately, scheduling a workshop won't be practical/possible currently with life giving my partner and me a few serious family, financial, AND health curveballs recently, so this year is all about study and research!

I am still hoping to hear from people about real numbers relating to their own situations. I would think that members on this forum would be the best possible resource for information on real world scenarios. I should probably create another topic for that purpose, actually. Stay tuned...

Edit: I saw the few previous replies after I posted this. I guess I should have stated which type of building I wanted to build earlier on, but that wasn't the point of the original post. I still do want to hear about challenges regarding insurance and financing - and building codes. I've been a finish carpenter for 15 years, so I'm pretty confident in my ability to quickly learn related skills. I have some of the tools I would need, but I don't have a sawmill. And I'm also still not completely sure about a timber frame. A lot of it depends on cost. But I'm open to pretty much anything. I'm still in the discovery stage of this whole thing, hence my desire for information!

Sam,

What numbers are you interested in? I keep a spreadsheet with all costs associated with my construction projects.

Classic triad: quality/speed/cost totally applies to my construction style. I never compromise quality, I lower the cost by bypassing middlemen - importing some ingredients, and not paying cartel prices to construction businesses. All comes at the sacrifice of speed. I'm already building since 2017 and I'm still not living in the house, but I paid cash for everything financing as it goes. I always underestimate the time needed to accomplish a task. If I already did it in the past I still underestimate by 50%. If I never did it, it takes 3 times longer than I think.

I design everything myself so I can order precise amounts of material and have almost no waste.

Our house is 1000 sq ft compressed earth blocks, all masonry, no plastic (except the barrier under the slab).
The seismic design slab was reinforced by me with the help of basic labor.
The rest was built by my mason with me working as a tender/supervisor.
The roof structure is heavy timber - 8x12 rafters that a master heavy timber carpenter erected for me with my help, so I know exactly what tools are needed for timber frame construction task.
I have all tools for rebar/concrete work, masonry, stone and wood. I also have a mill, but I did not mill the lumber for the roof.

It's an adventure, not just erecting "machine for living".
I could talk for hours...

When I started building my house, I was 18 years old and did not have much for tools either. When I started in on the kitchen cabinets I just borrowed a Radial Arm Saw since it could rip, cross cut, dado, rabbet, and other functions. They were crude cabinets as compared to my skill set today, but it did work. That leads me to say this:

I constantly refine.

If I do not like something, I just make improvements until I liked what I had. Sometimes it was the next day, other times years later like how my cabinets look today. I constantly make things to work for the here and now, not worry about years from now, nor worrying about getting rid of something I previously did. With that mindset I just constantly make things better.

But as for timber framing. Before I had my sawmill, I just chopped my beams by hand. I used a chainsaw and an axe, that was it. When I did not like the look as they were too rough looking, a hand power plane knocked them down to the look they have now. I still see axe marks in the beams, but it reminds me of where I came from. It took far more time than sawing on a sawmill,,, sure... but it was gratifying too. I was using what I had to provide for my family. In that case seven hand chopped 8 x 8 beams....

First of all, talk to your bank to secure a loan or insurance for any of the building methods. If you did not get the answer, then you can talk with those who already got a loan for their purpose and third, you can read the books Principles of Project Finance and Advanced Project Financing Paperback that give brief knowledge about finance

Sam’s question sparked a really interesting conversation!  The question about financing and insurance is probably the most frequently asked question I try to answer for the California Straw Building Association (www.strawbuilding.org).  Despite the existence of model building codes for straw bale, straw-clay, and cob construction, and the evidence of many well-designed, well-built structures made with straw, light straw, and cob walls having performed well for decades, lenders and insurers are still risk averse when it comes to building materials and methods they and their underwriters are unfamiliar with.  

While straw can play a structural role in a straw bale building, most of the bale buildings in N. America use framing and conventional shear wall systems to handle roof loads and wind/seismic forces. The straw is there to insulate and provide a lath for plaster.  Repeated testing at independent labs has shown that plastered straw bale wall assemblies resist fire better than many conventional wall systems, and if well designed and carefully built, they also don’t have the moisture problems sometimes seen in structures with less vapor permeable walls.  

During my career building and working on straw bale and straw clay buildings I never heard of a project that didn’t get built for lack of financing or insurance, but I also know of very few projects where the owners found both financing and insurance on their very first calls.  Most people report that they needed to shop around—a lot—before finding a willing lender and insurer.  

There are a lot of factors at play here, but one has to do with the numbers.  There just aren’t that many permitted buildings made with straw compared with more conventional building systems.  In recent years the number of new homes built in N. America per year were around one million.  Perhaps a few thousand of them used straw in any form (or hempcrete, or any other more natural material).  That’s less than 1%...which some consider statistically insignificant.  There are also a lot of reasons why building with more natural materials hasn’t caught on such that tens and hundreds of thousands of more-natural homes aren’t built each year—a good topic for another conversation!

CASBA is working on the insurance problem, and together with other advocates of more-natural building materials and methods, we have engaged an insurance industry consultant to help fix this problem.  Stay tuned!  In the meanwhile, hang in there and keep looking for more open-minded lenders and insurers.

RE: the question of how to get started on finding land, learning how to build, acquiring tools, etc., there are so many paths!  Of the hundreds of projects I have been involved in, whether as the general contractor, subcontractor, teaching a workshop, managing a work party, or consulting with an owner-builder, no two have been the same.  Some, like my wife and I, worked for many years to save money to buy land and build a house. We read books and took courses to skill-up for the adventure, and when we were ready (in our late forties!) we found land in a place we wanted to put down roots.  We moved to a nearby town where we rented a house while we began to build.  We hired contractors for those things we didn’t know how to do, or didn’t have time for (because we had full-time jobs), and spent evenings and weekends doing the construction work we were comfortable with.  We enlisted friends, family, and neighbors to help stack our bales and plaster our walls. Their handprints cast in the clay tiles that surround our front door are a daily reminder, and the inspiration for my company name.  That was fifteen years ago.  

Others I know purchased land and lived on it in a single-wide, tiny house, or camper while they worked day-jobs.  Some did all the construction work themselves, and others hired contractors to help.  Although I’m sure there are young people who start this process with a big pile of money, or a family property, or lots of experience, most of the projects I worked on involved people with a dream and the understanding that would take years, if not a lifetime, to fulfill.  My wife and I are still building.  In addition to rewilding the land we steward, we’re adding to our small orchard and garden, and in the coming years we hope to have a greenhouse and underground root cellar. Very satisfying, and keeps us out of trouble.  

Jim Reiland
Many Hands Builders