Financials
What can you afford?
Building is an expensive exercise: plan, plan, and then put aside a little more time to plan. This will help your budgeting.
Budgeting is not a vague hope – it should be an accurate and specific target by which to stick with as much as possible. The building process itself is stressful enough on you and your partner and your suppliers, without having the added strain of financial difficulties.
Why not investigate your alternatives to building beforehand – for instance, will it be better and more financially viable to sell and move to a home that will give you what you want?
Everyone wants a million dollar home but there are few of us who can have enough money, so the name of the game is compromise. Make sure you give yourself a budget you can afford and try to stick to it in spite of all the temptations. Avoid change to designs and materials if you can – changes cost money, not least because the tradespeople can deviate from their quote when you deviate from your brief. ( See our Budget Worksheet ).
These days, the least expensive rule of thumb costing for building work is around $1500 per square metre, $2500 per metre for more upmarket versions and upwards for luxury. And allow at least 10% for overruns, unforeseen costs or changes to the plan – you are likely to need it (and if you don’t need it then you can have a great housewarming party)!
Working out the estimated cost
If you have the time and you’re that way inclined, you can get an idea of the cost of the different materials you think you’d like to use – the cladding, the roofing, the joinery, the fittings, appliances, etc…
This is information you’re going to need eventually anyway, so now is an ideal time to do it. Otherwise you can just rely on your architect or builder to steer you in the right direction – but be aware that they’re not always right and the items they suggest may be wonderful but may not fit your budget!
Talk to your architect/designer about what you’d like in the way of design and material and get their ballpark figures. Remember, it’s easy to change your mind at this stage – not when the roof is about to go on and you’ve just realised that by building this way you won’t be able to afford to finish! Decide what’s important to you to keep and what you’re willing to give away. And make sure you and your partner keep discussing these aspects and that all sides compromise.
This is where a Quantity Surveyor can help you really nail down the costs. They will go through every aspect of the job and give accurate costings (though not necessarily exact, as specifications change during building).
Renovation and alteration costs
When the job is a renovation, other factors come into account. Do you want to match the style and materials already used in the house or are you comfortable to add something that is different (but still, ideally, complementary)? Is it time to change elements in the old house, for instance wooden to aluminium joinery or do you really want to match light fittings and bathroomware to the old style prevalent in the house or should you modernise?
And remember, with renovations, there are often hidden problems that only come to light when the wall boards come off. Be prepared for nasty surprises and make sure you have contingency in your budget.
Paying for it!
For most people, borrowing against the current value of the house to do an extension, or borrowing against the final value of the finished house if building new, is the usual way of financing a building project.
So, the first thing you will need is a valuation before you speak to a bank or mortgage lender. On the other hand, letting the financial institution know how much you’re looking to spend may save you the time and money of getting the valuation if your financial situation is tenuous.
Building Protection Insurance
You may (should) have Home and Contents insurance, but you may not realise that when you build you need to have a special form of insurance – building protection insurance. If there is an accident and work done gets damaged, or work is not done to the proper standard and fails at a stage through building, then this insurance can cover it.
Further information
For more information about mortgages see
ConsumerNZ. Some of this information is free, but for some you will need to subscirbe to get specific information.