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buy or build a house: Pros and cons

Who does not love getting something brand-new — especially if it is custom-made just for you? The problem is, custom-made things tend to come with higher price tags and longer delivery times — which are important factors in deciding whether you should buy or build a house.

A house is way too big of a financial responsibility to make a wrong choice. To help you land the best decision for you and your budget, we broke down the pros and cons of building a house. Let us check them out:

Pros of building a house

l Customisation: If you build a house from the ground up, you will get to personalise the details to suit your lifestyle and tastes — from the layout, cabinets and flooring to the sinks, lighting, paint colours and doorknobs. Even tract homes built within subdivisions allow for some customisation in colour choices, flooring options and certain finishes;

l Low to no competition: With homes flying off the market so quickly, competition to find the best existing home at the lowest price can be tough. But if you already own the land you want to build your home on, you obviously have zero competition;

l Lower maintenance: Since new homes are built to meet current building codes and have up-to-date technology, you probably will not have to worry about big repairs or heavy maintenance issues for the first few years — meaning no leaky roofs or failing HVAC (heating, ventilation, and air conditioning) systems. Plus, many homebuilders offer a limited warranty if something should break;

l Lower energy costs: New homes often feature the latest energy-efficient systems and materials, which usually leads to lower energy bills — woo-hoo; and

l Newness: You get to start fresh as the first owner of your home and enjoy brand-spanking-new systems, finishes and fixtures.

Cons of building a house

l Longer wait time: It takes an average of seven months to construct a new house — not counting the planning and approval stages. This means you will likely have a gap in living arrangements between the time you sell your old place and build your new one. So you will need to be prepared to cover the cost of renting until you can move into your newly built house;

l Harder to negotiate price: Most buyers go into a home purchase hoping to lower the price. While that is super common in the resale market, new homes are a little different. Usually there is not a lot of leeway on closing costs or purchase price with a builder — unless your real estate agent brings a creative mind to the negotiation table. Still, you’d probably get more bang for your buck with an existing home;

l Noise and mud: If you build a house where other new homes are being built, you might have to deal with construction noise, traffic and glops of mud along your commute. Sure, things will eventually calm down as other homes get completed, but it’s something to think about if your tolerance for noise level and messiness is on the low end;

l Stress: When you build a house, you will have to purchase land, decide on a home design, pick out flooring, fixtures, cabinets, countertops, interior trim, exterior trim, and on and on it goes. You will have to do all of this and stay within your budget. Managing all the details that go along with building a home takes time and effort. Do not underestimate the depth of stamina you will need to make sure it’s all done the right way; and

l Hidden costs: Those dollar signs you see on the sticker — for things like countertops, fixtures and appliances — are just the tip of the price-berg. Upgrades can quickly drive up the price of your new home and may or may not be rolled into your contract price. Play it safe by budgeting for only those you can cover with cash. And don’t forget about post-move costs like landscaping and blinds — they will sneak up on you too.

Tips on paying for new home

Whether you build or buy, make sure you stick to a house you can actually afford. Never get a house with a monthly payment that is more than 25% of your take-home pay — otherwise, you would be house poor.

If you are a first-time home buyer, it is probably better to go the cheaper route and buy an existing house to get in some homeownership reps and build equity (your home’s value minus how much you owe on it) before you take on the challenge of building a new house.

But if you are confident you can build a house while staying within that 25% limit and still handle all the other homeownership costs like maintenance and utilities, then building a house could be a fun adventure for you.

Whether you buy or build, owning a house you can afford is an incredible way to build wealth.

Working with an agent

The best way to choose whether you should buy or build a house is to talk it over with an experienced real estate agent. Your agent will know where to find the best deals in long-standing neighbourhoods or in up-and-coming communities. And they will help you decide if building a house or buying an existing home will suit your needs best. — daveramsey.com

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