Building vs Buying a House: Understanding Your Options
No matter how you go about it, buying a house is going to be one of the most significant purchases you’ll make in your lifetime.
It’s a worthwhile investment that involves a lot of thought and consideration. The first choice you’ll make is whether you want to buy a house that’s already built and ready to move into, or if you want to build a new home, from scratch. To help you decide, we’ve compiled five pros and five cons for building vs buying a house.
Why you should build a house
Building a house from the ground up can be exciting — you’ll be the first to live in a fully customised, brand-new finished home. You can choose the best design for your needs and look forward to having your own house, with your personal customisations.
Advantages of building a house
- Customisation — You can stay involved in the construction process and ensure it meets your specifications. If you make a detailed plan before the building begins, your house should be built exactly as you want.
- Modern features — A new construction project usually uses the latest building materials, technology, and energy efficiency.
- Lower maintenance — A brand-new home will require less maintenance and repairs than a home that has been standing for decades.
- Building warranty — Home builders provide a warranty on their work, so should anything go wrong, you’ll be covered.
- Appreciation — Your new home could significantly appreciate over time, especially if you build in a developing area.
Disadvantages of building a house
- Longer timeline — Building a house could take several months, not including any construction delays.
- Higher initial costs — Especially if you require custom features, building a house can initially be more expensive than buying one.
- Construction risks — During construction, you could face unforeseen risks such as delays, cost overruns, and quality control issues.
- Financing — Interest rates may be higher when financing a new construction project.
- Landscaping — New construction projects may require landscaping and outdoor improvements, which can add to your costs and extend the construction process.
Many of the disadvantages of building a house can be remedied by a strong building plan and anticipation of delays. Building a home can also be made much easier if house and land packages are available — this reduces the need for landscaping, speeding up the building process, and can often save money.
Why you should buy a house
Buying an existing home is a more convenient and an excellent option if you’re looking to move in immediately.
Advantages of buying a house
- Convenience — Buying a house is faster and more straightforward than building one.
- Negotiable price — You can often negotiate a better house price before making an offer.
- Established neighbourhood — Existing homes offer stability and are usually located near essential amenities.
- Easier financing — It’s usually easier to secure financing for an existing home. Interest rates are also lower.
- Easily inspected — As the property has already been built, you can easily inspect it before you move in. If you build a house, you’ll have to visualise what it looks like based on the plans.
Disadvantages of buying a house
- Limited customisation options — You may have to compromise on specific features, as the house has already been built.
- Higher stamp duty — You’ll have to pay stamp duty for the house and the land, whereas when you build, you only pay for the land.
- Outdated features — An existing home may have outdated technology and energy efficiency, so you may have to spend more on upgrades and renovations.
- Less warranty protection — You may not receive the same level of warranty coverage as you would when you build a house.
- Less potential for appreciation — An existing home may not appreciate as fast as a newly built home.
Again, the potential problems of buying a house can be remedied with sufficient planning. After an inspection, determine whether the house will need repairs and maintenance if you buy it. Weigh up the work you’re prepared to do to make your home as perfect as possible.
Choosing your financing options
Financing a home is challenging regardless of whether you’re building or buying. Here are a few different ways you can finance your construction or purchase.
If you’re buying a house instead of building one, you’ll likely end up with a traditional mortgage. These come with lower interest rates than construction loans, and you can choose a fixed-rate or adjustable-rate mortgage. Typically, your loan term is between 15 and 30 years. However, mortgages require a down payment of 5% to 20% of the home’s purchase price. Lenders may also have strict qualification criteria for mortgages, so ensure you have the relevant credit scores and employment history prepared.
When you build a house, you can take out a construction loan that covers the materials, labour, and permits. These often have higher interest rates and risks than traditional mortgages. The main benefit is that you pay interest-only instalments spread throughout the construction phase, which can help manage your costs in this expensive time.
Home equity loan
If you already own a home and you’re planning to move or get another house, you can apply for a home equity loan, which allows you to tap into your existing home’s equity to finance a new construction or purchase. These come with fixed interest rates which may be tax deductible. Taking out a home equity loan is recommended only if you have enough equity in your current home.
Is it better to build a house or buy one?
When deciding whether to build or buy a home, consider how factors such as time, convenience, costs, and repayment options affect you. Remember to consult professional help before making big decisions and ensure you have the funds to finance construction or purchase.
Here at Maidment Group, we specialise in creating quality residential developments. We offer affordable and impressive ready-built homes, new home designs, and house and land options, so if you’re looking to buy or build in North Queensland, contact us today to explore the possibilities. Our friendly team can offer you expert guidance and help you make the big decision.