Tuesday 21st November 2017
There are a number of reasons you may choose to build a home rather than buy an existing one outright. For starters, it’s often cheaper, and additionally, you have a greater level of control over the process, meaning you can dictate the exact parameters you’re looking for in a house. Provided you have the time and patience for a construction process, this might be the way to go.
It still won’t be cheap, though. In fact, drawing up a budget to build a home will probably be one of the toughest financial challenges you ever tackle. That process begins with either choosing a fixed-price approach or adopting a more dynamic construction budget.
Deciding on a budget structure
If you’re not ready for the hefty mortgage repayments that come with buying a premade house, that’s understandable – but budgeting will still be a challenge if you build from scratch. According to Your Home, the biggest decision to make is what kind of pricing model you’ll use. The common options are a “fixed price” model (also known as “lump sum”) and a “cost plus” approach.
The strategies are just what they sound like. With a fixed price, you decide in the beginning on exactly how much you can afford, and you don’t go over budget. This makes it easy to control your spending, but it also means you might compromise in terms of sustainable building strategies that will benefit you in the future. The cost-plus model allows you to add more expenses later; if you can afford it, this approach will help long-term.
Preparing for unexpected cost spikes
It’s often difficult to define your construction budget down to the last dollar. Building a house, like any long-term project, is one that can surprise you with unexpected cost overages. Research from OnProperty found that the most common additions to the building budget are due to site costs – for example, ordering soil tests and contour tests to make sure your location is compliant with local building codes. Site costs unrelated to the construction itself average around $18,000 in Australia.
If you’re looking at this price tag and feeling anxious, you’re not alone. But there’s good news – our team of loan specialists can help you plan for all those extra costs. Get in touch with us today to find out how we help make your dream come true.