Building a house can be exciting because you have choices. You get to pick the colour of your house, the style, the location, and little things such as counter tops, cabinets, and flooring. There was likely always something that you didn’t like about your home, so building a new house seems like a great way to get exactly what you want. While this may be true, getting what you want by building a new house doesn’t always come easy. Or cheap.
Unfortunately, there are a quite a few hidden costs that come with building a house. This can be extremely stressful, especially for a first time homebuyer, but it does not have to be overwhelming. As long as you are prepared for some of these hidden costs and budget for them accordingly, you’ll hopefully find that you can get through the process and still have money left over in the end for a new house-warming celebration.
The Hidden Costs of Building a New Home
Although there are many hidden costs found when building a house, generally you’ll not find yourself having to deal with every single one of them. Consider a few of the most common hidden costs you may encounter when building your house!
Upgrades
This is probably the biggest surprise for someone building a new house. Model homes are always shown with all the upgrades and extra features, but it isn’t always clearly stated that these are upgrades. In other words, you will often get quoted a price for building that new model home, but that price does not include upgrades. That price comes with basic counter tops, carpet, and light fixtures. If you want your house to actually look good, it might seem that just about every aspect of the house will need to be upgraded for an extra charge.
Site Costs
These costs include connecting to the water mains and sewerage system, connection to electricity, building permits, and appraiser’s fees. All of these connections must comply with federal, state, and local government legislation, so this has to be done correctly or else your mortgage may fall through or you won’t be able to sell the property down the line. In the end, this can very easily run into a few thousand dollars.
Interest
Although this may seem obvious, many are surprised by the amount of interest that comes with building a new house. If you have a 30-year mortgage, you could potentially pay almost double the price of your home when you factor in your interest rates. It’s also important to look at different home loans and look at the fees that may apply. Although there are home loans with lower upfront fees, these are often the ones with the higher interest rates. If you aren’t prepared for this cost, you could end up making a more expensive decision.
Legal Fees
You will have to pay a conveyancing fee that can vary from company to company. Conveyancing is simply what happens when someone prepares the documents for transferring of the property from one party to another. You will also likely have to pay what is called a stamp duty, or a tax that is used for all purchases of property. This will likely be included in your documents, but it is good to be prepared for the cost. Stamp duty varies from state to state, but every state has some sort of stamp duty fee.
Appliances
Many assume that a builder will include appliances, even if they are from the most basic brands. Unfortunately, this isn’t always the case. If you want a refrigerator, you may have to stump up the cash for it yourself
The Bottom Line
As long as you are prepared for some of these hidden costs, building a home should be exciting and stress-free. The biggest thing to remember is that you will want to upgrade. You should save a good chunk of money for all of the upgrades so that you can make sure you’re getting the house that you really want.
What Hidden Costs Caught You Out?
Do you have any experiences building a house? What were some of the hidden costs that surprised you?
Mark is one of the personal finance writers for Money Choices which does
One hidden cost no one mentioned: window treatments.
I can’t imagine all the costs that go into building a house. You pointed out some of the major ones, but I always wonder about huge construction errors and how much those would cost!