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Before You Build Your Own Home? You Should Know…

Before You Build Your Own Home? You Should Know…

 family looking at home being built

We all dream about that perfect home and what it would be like to live in it. Some may think it’s a castle in the countryside overlooking open land, while others may think it’s a small home in the city built from storage containers with a very modern spin. Whatever your “dream home” is, it’s fun to fantasize about designing it or to actually build what you create on The Sims(R)*. But, how hard is it to build your dream home from the ground up? How do you go about creating the ideal home design, where you decide how you want it laid out, with all the hidden quirks and conveniences that make it unique to you? Before you set out to purchase that stunning plot of vacant land to build on these are a few things you should consider when you’re planning to build your dream home.

Budget, budget, budget

This is the first thing to consider after you stop daydreaming and the lightbulb goes off in your mind to actually build your own home. Can you afford it? Where will you build that home? Where will you stay while it’s being built?

The average cost to build a house in Canada ranges from $120 to $195 per square foot for a detached home.

Make sure you have a projected budget based on how much the average house costs to build in your desired area. This should include purchasing land if you don’t already own a piece of land to build on. You should also keep in mind your maximum spending limit. Building a castle in cottage country may not be an option for you, but a custom-built bungalow may be doable when you look at your finances. Set up a maximum spending limit for your home so you don’t let your credit card run dry and so you know how to prioritize your wants versus needs. Expenses add up very quickly and you don’t want to get into too much debt before you even get to live in your custom-built home.

Make sure you factor into your budget:

  • The cost of the land;
  • Local and legal fees;
  • Taxes including land transfer tax;
  • Architect and contractor fees;
  • Cost of connecting utilities;
  • Landscaping costs;
  • Interior decorating and furnishing; and,
  • Installing electrical units and smart home features.

What to know about getting a loan and being pre-approved for a mortgage

If you don’t already have vacant land to build your home on, then you will probably have to take out a loan to purchase a plot of land. This usually comes with higher interest rates than a traditional mortgage. The down payment is also higher, ranging between 25-30%.

There are two types of mortgage rates when it comes to getting a construction mortgage to build your home.

  1. Completion mortgage: The loan isn’t transferred until the construction on the home is complete.
  2. Draw or a progress-draw mortgage: The builder draws money in increments as the home is built.

It’s also important to get good construction home insurance in case something goes wrong during the building stage. This might be if one of the workers gets injured, or the house is compromised due to bad weather conditions during the initial build. Not that you want to think about the what-ifs; like a tornado hitting mid-build but, it happens so it’s better to be prepared just in case.

Make sure you check your credit report and pay off any existing loans wherever possible to ensure you will be pre-approved for the mortgage you need. After all, your credit score affects the loan that you may receive. Also, it’s best to work with a mortgage broker rather than the bank on this one to ensure that you get the best interest rates considering they are usually higher than a traditional mortgage and a mortgage broker will have more lending options to offer.

What contractor are you going to use?

Shop around for contractors to find the best rates and the best reviews. Since you’re investing a large portion of your savings into building a home, you want it to be built correctly and safely to prevent any unforeseen problems in the future. Cheaper is not better. You might not want to hire the most expensive building team out there but, the cheapest company might not be as experienced or insured. I’ve heard a few horror stories about people who hired the “ really affordable” company just to have problem after problem before firing them and hiring the more expensive team they should have in the first place; doubling their initial costs with ample headaches along the way. Contact at least 3 contractors, ask them for a written estimate including labour, materials, and average price per square foot, and get them to give you an estimated timeline. A big red flag is no paperwork. If they can’t put it in writing, move on. You can also request their available home price guide to learn more about estimating the cost of building your home to back up the credibility of their estimate.

Normally the contractor takes care of getting the building permit for you. But if not, you’re responsible for getting all the required documents from your city’s development department. Before a shovel ever hits the ground make sure you have your permits and that you have checked into bylaws and building regulations in your area to make sure you aren’t in violation of any codes or rules. For example, building a dream home a foot from the edge of the water sounds beautiful but, it’s likely not allowed environmentally.

You should also know that it takes an average of 10 to 16 months to build a home if everything goes smoothly. Some factors can delay the process like bad weather, clearing the land, tearing down an existing structure, delays in delivery of construction materials, or lack of manpower.

Purchasing the right property

Every area has its pros and cons. Make sure that the property you choose will fit your lifestyle today and in 10 years. Are kids expected in the future? Where are the nearest schools? Is retirement on the horizon? Does the location fit your work style and your commute?

Make sure you factor in the local zoning requirements and any local bylaws where you’re planning to build. You can contact the county’s development department or check their website for this information. If there are plans to build houses in the area, then the government may want to expand the roads and take up some of your property. Factor in any noise in your neighbourhood from airports, railways, highways, construction, local industry, and so on as well because that will be important upon resale.

Work with professionals, from appraisers to financial advisors, from mortgage brokers to real estate agents

This is a big decision to make in your life. Building a home from scratch is a collaborative process that starts with having a vision of what your dream home looks like, and includes working with contractors, architects, and financial advisors to bring your idea to life. As a professional mortgage broker and financial advisor, you can call on me, Darren Robinson, to help you find the most appropriate building loan and the best rates for your traditional or nontraditional mortgage. Helping my clients along this journey is always something that I take pride in, and I can’t wait to help you achieve your dreams and build your oasis. You can reach me at (705) 315-0516, email me at [email protected] or click here to schedule a meeting to discuss your future custom-building goals.


*The Sims is a trademark of Electronic Arts Inc.

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