Can I Afford to Build a New Home in 2022?
We know just how much you’ve been looking forward to building your new home. Now that it’s so tantalizingly close, it’s all too easy to make irrational decisions that will come back to haunt you in the future.
A lot goes into building a new home, so it’s certainly not something you should rush into. You have to consider many things, especially cost.
While you know that a home is a significant lifetime investment with the potential to be a lasting legacy, the question that may be on your mind is; “can I afford to build a new home in 2022?”
Let’s take a look at what it takes to build a home.
The cost of building a new home
On average, it costs roughly $300,000 to construct a new home. This is not inclusive of land costs. However, the architecture and overall style also determine the overall price. Modern smart homes may cost millions to construct.
The amount you should expect to shell out depends on the location, tastes, and construction material. The latter, in particular, are very important determinants.
The alternative- buying a home
With the cost of building a home sky-high, the alternative is often a preferable option for many homeowners. However, there’s a catch - stiff competition.
If you have all of your cash up front, you’re likely to win most bids. As homeowners receive several offers for their property, you need some strong financial backing to land your dream property.
If you’re using a mortgage, your bid may not be prioritized, causing you to miss out on some juicy deals.
As such, buying a home outright is just as challenging as starting from scratch.
Financing your building project
By far the most crucial single determinant in building a new home is the depth of your pocket. Many people have two options- a mortgage or a construction loan.
Either way, your savings still have a huge part to play. To purchase the land, you can use a mortgage. For the construction project itself, the construction loan comes into play.
Nevertheless, you’ll have two different categories of cost to contend with at the end of the project. First, you’ll have to deal with the mortgage you took to buy the land. Second, you’ll have to service the loan you took to finance the construction.
Additionally, the latter comes with big interest rates. If this arrangement isn’t convenient for you, you can consider a construction-to-permanent loan. It’s a single loan that covers land purchase and construction activities.
However, you get the fiscal disbursements instrumentally.
The bottom line
So, can you afford to build a new home in 2022?
It isn’t so black and white. But, given the wealth of information you’ve gleaned from reading this article, you’re better placed to make the right choice.
Best course of action is to get a quote from a professional residential contractor before going ahead.