The budget for your new home build is one of the first things you should look at. Make sure that it is realistic, and within your means. Having a budget that is too small will be a source of stress throughout the whole process, however, overextending yourself financially might cause problems down the track with mortgage repayments. When you are setting your budget, it is important not to forget to determine not only the cost of the home itself but also all inclusions and site costs that will come up.
Two steps, it is that easy
There are two primary elements to figuring out your budget for your new home. Firstly, the amount you think you can spend and secondly, a figure you can actually spend.
So, think about a number – the overall amount or the monthly repayments that you are willing to invest into your new home. Have you noticed I used the word invest? The reason why we prefer the word ‘invest’ over ‘spend’ is because you expect to get something way more valuable in return for your money – you’re going to vastly improve your lifestyle and have a great asset as you head into the future. Perhaps you’re creating a place for your family to thrive and grow. Maybe you’re providing a lifestyle for you and your spouse in your retirement years – the lifestyle you’ve worked hard for all your life. You’re investing your money with the expectation of a once-in-a-lifetime return. That’s why we think you’re not just “spending” money.
If you have the cash
Now, think of the highest number that you are willing to invest into your new home… does $250,000 do it? How about $300,000 or $500,000? If you are getting to a number that scares you, it is probably your “stretch” point, which is the amount you are willing to invest to get 100% of everything on your dream list. But you might feel more comfortable getting 90% of your list and lowering the overall project cost to a more acceptable amount.
If you need to borrow the money
If you need to get financing, it might be better to think in terms of monthly payments, so do the same exercise for that number. Once you have a number you are comfortable with, you need to figure out if you can actually borrow that amount and make the regular repayments.
In terms of the overall home building process, you really need to figure out your budget before you go down the path of finding or designing the perfect house plan. Avoid the mistake of creating your dream house plan, spending lots of time and energy on it, falling in love with it, only to find out it’s way over your budget.