managing your budget
Called to account
When you set out to build yourself a home, the last thing on your mind is accounting. But keeping a watchful eye on the finances can make the difference between having a good experience and ending up with a nightmare. Deciding what you want and what you need
Right: It’s way too dangerous for your finances, family and relationship to plough on with a project that was financially doomed from the start.
Start off by deciding what it is you really need from your new build. Begin with the ‘must haves’ and then add the ‘wish list’. Bounce this around the family so all your ‘stakeholders’ feel involved, but don’t commit yourself until the financial plan is in place. Next, sit down with your partner and work out your personal finances. How much money do you actually have? How much can you borrow against your income? What are your savings? What, realistically, will your current home, if you have one, sell for?
have more cash available than in fact is the case. It is here that money trouble starts. Be brutally honest with all the sums you come up with and, if anything, underestimate your income and borrowing power.
Decide what you’re going to do
Starting out starry eyed over a dream house you don’t have the budget to fund causes many couples I’ve known to come to grief. In my experience, the next stage is to see a professional designer. Talk through your list of wants and needs and start to get a handle on the build costs. A locally based person will know what builders in the area charge per square metre / what the professional costs are. This is a first, rough estimate. The result is often a wake-up call. Now is the time to get real about what you can afford. If the answer is a lot less than you thought, do you still want to proceed? I think more couples should back out at this stage than actually do. It takes courage, but it’s way too dangerous for your finances, your family and your relationship to plough on with a plan that is financially doomed from the start.
Getting the money
Above: Begin with the musthaves and then add the wish list but don’t commit yourself until the financial plan is in place.
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Lots of homework should follow this conversation. Get the house valued by three agents; start talking to lending institutions; meet with your bank manager and discuss your plans; talk to your accountant if you have one; make a realistic (and preferably, pessimistic) assessment of what your savings could be worth in the future, and so on. At this early stage we tend to fool ourselves that we’ll
There are a range of institutions interested in lending for self-builds, most of whom will provide up to 75 per cent of the build cost. Some will lend towards the land, others won’t. Who will lend you what will depend on your earnings and other security you can offer. If you are self-employed or building as a sell-on, then expect many more problems raising the cash. Be prepared before you go to see your lender with a drawing of the proposed house, details of the site (with agent’s brochure if there is one), a broad timetable of when you’ll need the money (in stages over, say, one year from build start), a copy of the planning permission if you have it, and your building cost estimate from your architect or surveyor. If you can also detail the costs listed below, they’ll be mega-impressed.
Defining Cost
It’s easy to spend a third or more of your entire budget on the site, which is a good investment because you can always add to the house later as more funds become available. The land is unlikely to fall in value but tastes in housing change. SelfBuild & Improve Your Home