Building a house or renovating your existing home can be an incredible, life-changing decision that results in finally getting your dream home.
However, it’s critical to consider the financial steps involved in building a house to ensure your dream home becomes a reality in a way that’s manageable for you. The same is true for renovations, which can offer incredible transformations to your home.
There’s a lot to consider, including:
- The scope of your renovation or new build
- What affects the cost of your project
- Finding an estimate that aligns with your budget
- Financing options
- Working with builders
Understanding the Scope of Your Project
This may seem obvious, but figuring out the scope of what you’re looking to achieve is vital and an important financial step to building a house. Your budget will ultimately determine what is possible, but it’s essential to clearly define your wants, needs, and goals at the outset of the process.
The scope of your project will ultimately determine the cost of building a house, and it’s essential to clearly communicate your needs to both your home designer and builder.
Take a look at What Information Your Home Designer Needs to prepare yourself for this process.
Defining Your Wants vs. Your Needs
When Building a New Home
Building a house is an incredible opportunity to create the home of your dreams. That’s worth getting excited about, and you can and should try to make sure you get everything you’re dreaming of.
Custom home designers can help you achieve that, but prioritizing what matters most to you is an important component of the financial steps to building a house.
Perhaps you’d like to add a secondary suite or a back yard suite that you can rent out to help ease the financial burden or increase your home’s long-term value. Maybe the home you always picture in your dream had en-suite retreats for parents or indoor-outdoor areas for entertaining friends and family.
Prioritizing your must-haves and your needs can ensure you get what matters most to you as you go through the financial steps to building a house.
When Renovating
When considering a home renovation, think about exactly what you want. It’s not actually all that different from building a house, in that you’ll want to prioritize what matters most to you.
Whether it’s adding a new room, exterior work, a second floor, or a facelift for your kitchen or bathroom, the scope of what you’re looking for in your home renovation will ultimately determine the cost.
Practical Tips for Defining Project Scope
- Rely on a Designer to Research Local Zoning Laws: Your municipality’s zoning rules will impact what is possible, whether you’re planning a renovation or building a house. You can find a wealth of information online, but your custom home designer has extensive experience working in this area and will be able to explain the bylaws and potential allowances.
- Bring in a Home Builder Early: Designers can offer valuable insights into the complexity of your renovation, while home builders can provide details on potential costs to help you refine your project list. They can be helpful in the early stages as you go through the financial steps to building a house.
Other Factors To Consider
- Timeline: Building a home takes time. You should plan for 12 to 16 months.
- Permits & Zoning: Ensure your lot meets all local regulations and obtain the necessary building permits.
- Evolving lifestyle needs: How will your home serve your family’s needs now and in the future?
- Eco-friendly options: Energy-efficient homes can save you money in the long term.
Factors That Affect Project Costs
New Builds
While many people assume that custom home design and building a house are always expensive, the reality is that the cost almost always depends on individual wants and needs.
There are several key factors that impact the cost of building a house, and many ways to keep costs down. These are important to consider as you go through the financial steps to building a house:
- Size of the home: Generally, larger homes tend to cost more. Square footage is definitely not the only factor that impacts the price of building a home, but the number of bedrooms, bathrooms, and auxiliary buildings, such as detached garages, can all increase project costs.
- Complexity: Whether you’re building a home right in the heart of the inner-city or on a rural acreage, costs will rise as your design becomes more complex. Simplifying design will almost always reduce costs when working with a tighter budget.
- Location: When building a house, the location will significantly impact the cost. If you’re building in the inner-city, there are space limitations that can make the construction process more difficult and cause it to take longer.
Home Renovations
Similarly to building a home, there are a number of factors that impact the cost of a home renovation:
- Size and Complexity: Larger and more complex projects will naturally cost more. Structural changes, like removing walls or adding square footage, require a higher budget.
- Materials: The quality and type of materials can significantly affect costs. Luxury finishes and custom features come with higher price tags.
- Labor: Depending on your location and the required expertise, labour costs can vary significantly. Specialized work, such as plumbing or electrical, often incurs higher costs.
Finding an Estimate That Aligns with Your Financial Situation
Once you have a clear idea of the scope of your renovation or new home, you’ll probably want to know what it will cost. For this, you’ll need to speak directly with builders for an estimate. If you’re working with a home designer, we can recommend a builder early on in the process.
Once you get an estimate, it will inform other decisions as you go through the financial steps to building a house. Here’s how to find an estimate that aligns with your budget:
- Evaluate Your Finances: Make sure you know exactly how much money you have available to build or renovate your home. Consider savings, investments, or the possibility of financing.
- Get Estimates: Once you have a clear idea of your project scope, obtain several estimates from contractors. A proper estimate is crucial to consider and an essential part of the financial steps to building a house. It will give you a realistic range of what it will cost to build a house or renovate. Custom home designers can often recommend builders whom they trust and who are well-suited for your project.
- Include a Contingency Fund: Always include a contingency fund in your budget, typically 10-20% of the total project cost, to cover unexpected expenses.
How to Choose the Best Financing Option for Your Situation
Consider your financial stability, the total cost of the renovation, and how comfortable you are with taking on debt. Compare interest rates, repayment terms, and any fees associated with different financing options. A financial advisor can provide personalized advice based on your situation.
Financing Options for New Builds & Renovations
Once you know how much a new build or a renovation will cost, it’s time for the next part of the financial steps to building a house: considering your financing options. For this, you’ll need to talk to your bank or a financial advisor.
What Are Your Financing Options?
- Savings: Using your savings is the most straightforward option and can make the financial steps to building a house much easier. It means avoiding interest and debt. However, you also don’t want to deplete your emergency fund.
- Home Equity Loan or Line of Credit (HELOC): These options allow you to borrow against the equity in your home, often at lower interest rates.
- Personal Loan: Unsecured personal loans can be a good option if you have excellent credit, but be aware that they typically come with higher interest rates.
- Credit Cards: Useful for smaller projects or short-term financing, but high interest rates make them less suitable for larger, long-term financing.
Finding the Right Home Builders
Selecting the right home builder is crucial, whether you’re building a new home or undertaking a renovation. A good builder not only brings the design to life, they also ensure the process goes according to plan and stays on budget.
Knowing your budget before meeting with builders will help with the process and is recommended for anyone going through the financial steps to building a house.
There are a few key things you can do when trying to find the right builder:
- Get Recommendations: Start by asking friends, family, and neighbours for builder recommendations. Their references can be invaluable, and our team has worked with excellent builders across Calgary and can recommend who we think would be well-suited to build your house.
- Check Credentials: Ensure any builder you consider is licensed, insured, and has a good reputation. Check online reviews and ratings on reputable websites, and ask for references.
- Interview Multiple Builders: Don’t settle on the first builder you meet. Interview several to compare quotes, communication styles, and work philosophies. This also gives you a better understanding of the market rate for your project.
Navigating Contracts & Negotiations
- Detailed Contracts: Ensure your contract includes a detailed scope of work, materials to be used, timelines, payment schedules, and a clear process for handling changes to the scope. A clear contract protects both you and the contractor throughout the financial steps to build a house.
- Negotiate Wisely: It’s acceptable to negotiate with contractors, but focus on value rather than just the lowest price. Discuss options for cost-saving without compromising on quality.
- Payment Schedule: Never pay the full amount upfront. A typical payment schedule includes a deposit at the start, incremental payments during the project, and final payment upon completion and satisfaction with the work.
How to Communicate Your Finances & Timeline Effectively
- Be Transparent: From your first meeting with your builder, be clear about your finances and any constraints. A reputable contractor will respect your financial limits and work with you to find solutions.
- Regular Check-ins: Schedule regular meetings to discuss the project’s progress, any issues that have arisen, and adjustments to the budget or timeline as needed.
- Document Changes: Any changes to the original plan should be documented and signed off by both parties to ensure transparency and agreement on additional costs or timeline adjustments.
Build Your Dream Home with Ellergodt Design
Whether you’re looking to build a new home or renovate to meet your family’s needs, careful consideration is required as you go through the financial steps to building a house.
At Ellergodt Design, our team has decades of experience helping Calgarians design new homes and renovation projects that transform living spaces. Whatever your budget, we can help bring your vision to life.
For more information on how Ellergodt Design can help you build your dream home, e-mail us at info@beginwithdesign.com or call us at (587)802-2304.