Buying and building a house is a huge financial undertaking. For many, the thought of building from the ground up can be daunting. However, with the right team, it can be very manageable – especially when you have financial help. The most important thing is to consider your circumstances (financial and lifestyle) and to figure out what kind of help you can get.
Things to consider
Before you get your wonderful dream home, you must start right from the beginning. There are a few extra costs you need to consider. Some of these costs will be expected and others unexpected.
What to expect before building your beautiful new home:
- The cost of the land – You need somewhere to put that gorgeous future home of yours
- Stamp duty – This will vary from state to state
- Legal costs – To purchase the land and also the contract between a builder and yourself
- Land registration fees – This will vary from state to state
- Site costs – This includes surveying the soil and the lay of the land (which basically means whether the land is level and what needs to be done to accommodate it if it’s not). Site costs may also include access to electricity, gas, water and sewerage.
- The flooring – If you’re buying a block of dirt, you’ll need to lay down foundations before you even construct the framing. This comes at an added cost.
- Access points – Some building quotes will only include the cost of the dwelling itself, without access points such as driveways or footpaths.
Of course, along the way, other costs will crop up – as they do with anything in life. Even small things (such as having to buy new wheelie bins from your local council) can add up, so always factor a buffer into your budget.
Doing it yourself
Many will believe that doing it yourself means it will be a cheaper exercise. If you’re a tradie or work in the construction business, this may be the case. However, for those who do not work somewhere within the home building industry, it may be better to leave it to the experts, especially as you’ll be living in this home for years to come.
Of course, building a home through an experienced company will come with costs. But if you weigh up the potential cost of mistakes, unexpected issues that may occur when DIYing the project and extras that you may need to pay for, you may find the ‘extra’ costs you thought you’d incur with a builder, may actually come out even.
Remember, there may be issues with the site or build that you can’t even anticipate. Things such as heritage listed areas (yes, even with land there can be heritage and history issues), excavations, water troubles and even dealing with council can be a pain in the neck for those who aren’t experienced. A building company will be able to budget and reschedule anything that happens accordingly, meaning you won’t have to deal with the stress involved.
Weigh up your circumstances
Obtaining a loan to build a new property isn’t just about weighing up the costs. You also need to consider what you can afford to borrow. This means analysing your income, your potential expenses, your financial future and whatever financial commitments you already have.
When looking at whether you’re eligible for a loan, lenders will look at your base income, whether you receive commissions or bonuses, any tax-free income you earn and whatever current expenses you have. This includes your rent, any debts you have outstanding such as FEE HELP or car repayments, credit cards, how well you’ve kept up at repaying the cards, and all of your everyday living expenses, from your groceries to your clothes shopping and even a cleaner who may come to your house once a week.
Understanding all of this will help you understand what your maximum repayments can be in order to fully service the loan. It’s a good idea to overestimate everything rather than underestimate. The danger here is being provided with a larger loan than you can afford. Sure, being loaned money to buy your home is a great thing, and you may think you need more than you actually do. However, accepting a loan that you can’t repay will only put you in debt and potentially cause your finances to spiral out of control.
Your expenses and your loan
Once you have an understanding of your current expenses and how much building your new home will actually cost, you can then estimate what kind of loan you’ll need to borrow to make it happen. Without these estimations, it’s hard to determine the figure. Therefore, it’s important to know exactly what costs you’re signing up for when it comes to a build, add that to your current expenses and then see what you have when it comes to savings. Looking at the full picture will help determine how you can make it all work financially.
If you need help determining costs and would like a quote on your dream build, contact Gemmill Homes. We’ll take you through the whole process from floor to ceiling.