Home Construction Loan

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Don’t Forget to Include Home Construction Loan Costs in Your Budget

Once you have taken the brave step of deciding to build your own home, working out the budget required can prove to be daunting. There are so many factors to consider that quite often the expenses associated with a home construction loan are neglected!

As the majority of people who decide to construct their own home need to take out a home construction loan or some form of financing to cover the build cost, the lender will always ask that a budget is submitted as part of the application. This budget should include such things as:

• Cost of land
  
• Cost of materials
  
• Cost of labour
  
• Architects fees
  
• Planning Permissions etc

What about the fees associated with a home construction loan?

Most people tend to forget that the home construction loan they are applying for actually has costs associated with it that they should allow for in their budget too!

• Application and processing fees
  
• Closing fees which can sometimes amount to thousands of dollars
  
• Monthly interest payments – throughout the duration of the construction you will have to make payments on the home construction loan. These will vary, depending on the amount of loan money that you have drawn down and the interest rate the lender is charging. You will have to be able to pay this every month or you will default on the loan.
  
• If you have opted for two different lenders, one for the construction loan and one to revert to a normal mortgage when the construction is completed, you will have to pay two sets of application and closing fees.

This list isn't exhaustive by any means. When budgeting for the cost of building your new home, you must take the time to try and make sure that every expense is accounted for including interest payments and associated costs with your home construction loan. You should also make sure that you have a contingency in your budget for any eventualities. No matter how prepared you are it is estimated that new home builds tend to cost $20,000 more than you budget for!