Building a house can be very stressful. It takes a long time with a lot of effort that not only requires the buyer to have a great attention to details but also the ability to solve every conflict. It is not exaggerating to say – building a house is about fighting a big battle because it is never a smooth process. However, it is definitely rewarding when seeing the house built up as your design! Most importantly, Propertyknowall will help you step-by-step to understand what to do when you reach each stage or when you face challenges.
Before starting building your house, there might be few questions in your mind: How much I can spend on to build the house? How much is it to build a house? Where to find the land? And what is the process of building a house. Here, we will explain it one by one.
Contents
1. How much I can spend on to building a house?
This comes to your borrowing capacity. At the beginning, you don’t have to know exactly the amount that you can borrow. A roughly idea would help. The best way is to make an appointment with a broker or a lender.
In general, there a five Cs to determine how much you can borrow – Character, Capacity, Capital, Conditions, Collateral (Check here for more details). The bank will consider these 5Cs to determine how much you can borrow.
If you have a good credit record, your borrowing capacity is mainly determined by your capital and capacity.
Capital is about how much deposit you have to buy the house. Since the bank won’t lend 100% of the house price to you, you will need to have certain deposit to start.
Majority of the Banks will require you to have at least 10% deposit of the total house price. If it is your first house, you might just need 5% deposit to buy the house if you meet certain criteria.
Just note that apart from paying the deposit, you will need to pay for stamp duty, solicitor, building and pest, and future furniture fee. So not all your money can be used for deposit.
The capital only determined by your deposit. It can be from your actual savings or it can be your refinance cash from your existing house. It has nothing to do with your incomes.
Capacity is based on your income, the bank calculate how much you actually can borrow. It is only determined by your income and how much the bank has lend you.
The bank will then based on your capacity and your deposit to determine how much they can lend to you.
Example:
Lily wants to buy a house for 600k. Based on Lily’s salary income, she can borrow up to 900k. However, as Lily just start working, she only has 60k deposit. If the bank will lend Lily 90% of the total house price, can Lily buy this house now? Assume Lily doesn’t need to pay for the LMI (Loan mortgage insurance).
The answer is not. Even though Lily has 10% of the total house deposit, she still needs cash to pay for the stamp duty, solicitor fee etc. Therefore, she needs another 10k-20k more to be able to borrow 90% from the bank.
Each bank’s website also has a simple calculator to tell your borrowing capacity. You will still need to consider your capital.
- CBA – How much can I borrow
- ANZ – How much can I borrow
- NAB – How much can I borrow
- Westpac – How much can I borrow
Do find a good lender or mortgage broker who can help you with the whole process. At the end of the day you will know what is the maximum house price you can afford.
2. How much does it cost to build a house?
There is no doubt that building a house becomes more and more expensive every year. Normally, the final price of the new house is made up of two parts – the land price and the actual building price.
Land price is very straightforward that you can check the listed price, while the construction cost can vary. It normally comes up with four parts – The plan that you choose to build, the site cost (the soil type, any slop ect.), any upgrades (e.g. Hampton style kitchen, luxury façade), and things after handover (such as security camera, fence, and landscaping).
Here are the details of building a house
Normally you will be looking at $1000-$1800 per square metre to build a house. This price guide is for budgeting builders’ cost. Before knowing exactly how much to spend to build a house, understanding what you really need for your house is very important – the upgrade items, the material that you’d like to use, the labour fees. This information will be covered here.
3. Where to find a land
After working out your budget, now it is pretty much the time to check the land.
Internet has made the searching process so much easier. There are many ways of finding the new land- passing through, advertise, searching from internet ect. Here are the three main ways to start:
- Realestate.com.au or Domain.com.au
In Australia, realestate and domain are the two biggest websites to check the houses and the lands.
In their websites, there is one option called ‘New home’. Underneath, there is a ‘Land’ option. You will find all the available development sites in that area.
- Find the display houses/Village
Many big project builders have their display houses in the big development sites. Searching the area’s display village/houses, you will find the new development lands there or nearby.
Normally where there is a display village, it shows that the development site is big. Usually, the value of the land will be higher than the small development site without the display village. This is because only the large developers can arrange the display village. And the houses in the display village are well designed with a lot of upgrade. This will also increase the house price in that area.
- Through friends and family
If you have friends or family bought land recently, the best way is to check with them. Normally they would have done lots of researches on the land. Afterall, it is not a cheap investment.
Start from their recommendation and suggestions, then inspect and make your own decision.
At the beginning you may feel a big overwhelming as not sure where to start and where to check.
The best way is starting from the area that you are familiar with or start from the development site that next to CBD. Normally the distance closer to CBD or the travel time closer to CBD will have the better value. Then go to inspect the area. Your real feeling is very important. Here is the details of how to find the right land.
