Your New Home: Buy or Build?
This is a question I hear often; should I buy or build? Both have their merits and each has a different level of commitment. The pros and cons may seem obvious but there are multiple facets to consider. Buying the house down the road that’s been there since 1950 warts and all:
- It’s already done, you can move in within a short time frame.
- You look through a lot of stock so get to kiss a lot of frogs before finding Prince Charming.
- Financing it is usually straight forward.
- The suburb is known and can suit lifestyle better given you have picked the location.
- Someone else’s decorating tastes inside and outside of the house
- Competition on the price you pay with all the other buyers
- If you must sell, bridging finance can be difficult to finance if you haven’t already sold your own property (think LVR rules on investment properties at 60 per cent). Who wants to sell and then be at the mercy of finding something else in the market, especially if you have very specific criteria?
- Usually an older house so there is more maintenance costs
- Agent’s costs need to be paid even if they are by the seller the costs are borne by all by having a middle man.
This is of course the traditional path to home ownership, tried and true but when you just can’t find the right home or keep missing out on property then the alternative becomes the only option. Building your new entry level home or bespoke Grand Design
- Your tastes – doesn’t mean you will like everything you do at the end, but you get what you want at the time
- Usually you make equity in the process 10-20 per cent, which is great for first home buyers
- LVR rules are more flexible on new builds
- Interest can be capitalized into the budget while you build so you aren’t paying two mortgages or rent and mortgage payments
- New and lower maintenance, at least initially
- Creating something that can meet several social issues, green ethos and assisting with NZs housing shortage.
- Time and effort to organize the project and finance – it’s all consuming and is especially hard on marriages or partnerships
- Budget overruns – I have only seen no overruns happen once in 16 years in finance, it always cost more than you think!
- Challenge of finding the land – not all areas you want to build in have sections available
- Financing can be more difficult as banks take a more conservative view or require more oversight like progress valuations or a quantity surveyor reviewing the costs up front
- Often you must take on rented accommodation while you build or double up on finance
- Many developments are locked up between the developer and build companies so you do lose control and choice of styling to a certain extent due to building covenants
- Dealing with trades and most of the time a very steep learning curve. I have seen first home buyers take on builds and be successful, so it’s not limited to those who have done it before or are onto their second or third home.
However, it is all consuming so get ready to make a lot of decisions. If it’s a home with template plans, like Platinum Homes or Golden Homes then there will be less decisions but still choices to be made.
With either of these directions it imperative to build a team around you who understands the process and really helps you get the most out of the next purchase – architect, building company, builder, mortgage broker, sub trades, real estate agent, lawyers and so on.
Loan Market Capital and Coast are experts in home loans and construction loans, so call us or message me if you want sound advice through the build or buying process.
*All information provided is for information purposes only and where the information comes under the auspices of the Financial Advisers Act 2008 it is considered to be class advice only. No information is to be taken as specific personal advice.