Is it Better to Build or Buy a Home?
As you begin your house-hunting journey, it’s common to start with a list of features and amenities you want in your new home. While everyone’s “wish list” is different, it’s not always easy to find a home that checks all the boxes. A custom-built home is also an option since it can be designed to match your needs—but when faced with the choice of buying an existing home or building new, it can be challenging to know which route to choose.
Here’s a quick breakdown to help you determine if it’s better to build or buy a home.
Benefits of Buying an Existing Home
- Less expensive: When you factor in the cost of buying land, securing permits, hiring contractors, and buying materials, the price of a custom-built home can escalate quickly. When you buy an existing property, you can work with a realtor to find a home that suits both your needs and budget.
- Faster possession: Buying a home and taking possession typically takes 30 to 90 days. On average, building a new home takes 12 to 18 months from pre-construction to move-in day.
- Easier to secure a mortgage: Loans for new builds are more difficult to get than a traditional mortgage, and banks often require a large down payment or your current home as collateral. This can be a barrier to entry for first-time homebuyers or those with a smaller downpayment.
Drawbacks of Buying an Existing Home
- Customization: Although a realtor can help you find an existing home that closely aligns with your wish list, you can’t modify the home to suit your preferences until after you take possession.
- Potential repairs: An existing home may need renovations to make it move-in ready. Some of those upgrades can be costly, and you may also be faced with construction delays that require you to make alternate housing arrangements short-term.
- Potential utility upgrades: If you buy an older home, you may need to upgrade your utilities, such as the furnace and water heater. You may also need to replace outdated appliances.
Benefits of Building a New Home
- Custom design: A newly-built home can be designed to exactly match your needs. You can also customize the building materials and exterior features, such as landscaping.
- Less maintenance: Newly-constructed homes typically need less maintenance since everything is in new condition. New builds in B.C. are also required to have a builder’s warranty to cover the structure, foundation, labour, and materials.
- Energy efficiency: You can customize the building materials and include “smart” features to make your home more eco-friendly and sustainable. Enhanced energy efficiency can also result in lower utility costs.
Drawbacks of Building a New Home
- Difficult to finance: Unlike traditional mortgages, a new home build requires a property loan and construction loan. Property loans can be difficult to obtain, especially for first-time homebuyers, because there is no collateral. Construction loans usually have higher interest rates than typical mortgages.
- Cost overruns and delays: Like any major project, there are often unexpected expenses and delays that can add thousands of dollars to the final building cost. It is also recommended to buffer your building budget by 10% to account for potential overages—and to meet financing requirements with some lenders. Delays in construction and uncertainty about move-in dates can also make it challenging to sell and arrange possession of your existing home.
- Stressful and time-consuming: When you work with an experienced realtor, they work with you to support and guide your home-buying experience. Building a home comes with the stress of buying the land, obtaining permits, selecting a builder, choosing features and amenities, and securing financing.
Are you in the market for a new home?
As an experienced realtor, I help homebuyers find properties in Victoria, Cowichan Valley, and the South Island’s Westshore communities that match their wish list—and their budget. I’ve also been through the home-building process myself and can work with you to initiate your own custom build. Contact me today to explore exciting opportunities for home ownership and real estate investment on South Vancouver Island.