Building your home can be an exciting adventure but it can also be overwhelming. If things go wrong, the results could be very costly.
Yet, as People’s Choice Credit Union Chief Executive Officer Steve Laidlaw explains, some planning and good advice can help you avoid some of the pitfalls and enjoy a great outcome.
1. Research, research, research
Constructing your own home is a significant investment in both money and time. Undertaking your due diligence and understanding what you want before signing a contract will pay dividends in the end.
I can’t stress it enough – research everything and seek advice. Talk to experts about what you need and take their advice into account, but always be sure you fully understand your options. Think carefully about the location, the type of home, orientation, layout, all the various costs, fixtures and fittings, council rules … the list goes on. It can seem like a lot of work but it’s far better to spend some extra time and a little money making sure you get things right the first time, rather than having to correct or live with mistakes. Changing plans during construction can be expensive and disruptive to timelines, so all major decisions should be finalised before the ground breaking.
2. Location, location, location
When deciding on where to build, narrow it down to two or three suburbs – ones that take into account your budget, lifestyle needs, schools, distance to work, public transport, and shops. Keep an eye on local news to learn about new roads, railways or other major developments to spot the up-and coming neighbourhoods that are well-priced now and have good potential to increase in value in the future. If you’ve found some great land, make sure you undertake a site survey to identify any possible issues. Soil type is an important consideration because it will determine some major costs including site preparation, digging your footings, and landscaping. Also look at zoning requirements and encumbrances which could seriously affect your plans.
3. Budget is king
The one thing you can almost certainly be sure of is there may be unexpected costs somewhere along the line when building a home. Even with fixed priced contracts, make sure your budget has some leeway right from the start. Planning and sticking to a budget is key to building a home that becomes a valuable financial asset for your future. All first home owners should research government financial grants and concessions available to them. Offers and conditions differ from state to state, so research what you’re eligible for. In South Australia, First Home Owner Grants of $15,000 are available for new homes, as well as savings on stamp duty for some off-the-plan apartments. Financing should be arranged to suit your current financial situation, but should also allow for flexibility in the future should your circumstances change.
Keep a close eye on costs through every stage of the project and communicate well with your builder to ensure you’re paying for what you want and you’re getting what you’re paying for. It also pays to be wary of over-capitalisation. Having the most expensive home in your neighbourhood might not pay off when it comes time to sell later on.
4. Shop around
Home builders have different strengths, so only consider those that have experience building the sort of home you want. Display homes will give you an idea of the plans on offer, but they are obviously a sales tool, so make sure you look at real homes they have recently finished and consider the business. How long has the builder been operating? Do they, and all their subcontractors, have the correct licences and insurance? Have there been any complaints? A quick search online will show up any red flags. Be sure to shop around for your home loan too. With interest rates at their lowest for more than 50 years, there are some great rates available, but a small difference in the rate, term, type, and the fees and conditions of your mortgage can have a huge impact over the life of the loan.
5. Read the fine print of your building contract
New build contracts can be complex documents and, like all contracts, need to be looked at carefully before signing on the dotted line. Some of the big ticket items which can break the bank and might not be costed for include variations to the footings, excess soil removal, service connections and landscaping. Also, have a very clear understanding of exactly which fixtures and fittings are included. You should know exactly what the cost and quality is of everything from carpet to ceiling fans. Be clear on the terms and conditions of any ‘guarantees’ and remember that you can always have some items installed after you’ve received the keys from your builder if you’re not happy with the terms your builder offers. People’s Choice Credit Union has helped more than 500 members finance the construction of their new home so far this year. Case studies are available for interviews and photographs by appointment.
* People’s Choice is one of Australia’s largest credit unions with more than 345,000 members across Australia; 48 branches and four advice centres in South Australia, Northern Territory, Victoria, Australian Capital Territory and Western Australia; $9 billion of funds under management and advice; and 1,100 employees.