Taking the plunge into self-construction

28 March 2016 by National Bank

Building your dream home from the ground up? Satisfaction guaranteed! Of course, before undertaking such an ambitious project, it’s best to think long and hard about it. Here are four things to consider before making your decision.

1. Am I the right type of person for this project?

You’ll need to invest between 20 and 30 hours per week to complete your self-construction project. It’s practically a full-time job! From the first plans to the finishing touches, a number of decisions need to be made each day that directly influence the schedule and budget.

Also, if you hire a project manager to take care of this important responsibility, you should still expect to make a considerable personal investment. After all, it’s your house!

2. Do I know all of the steps required?

Drawing up a budget, developing plans, applying for permits and choosing a team. Before you even break ground, weeks, even months, go into preparing and planning a self-construction project.

Next comes excavation, pouring the foundation, building the frame, installing the exterior finishing, doors, windows and drywall, and interior finishing. It’s not uncommon for construction to take more than six months.1 National Bank allows for a maximum of twelve months to complete the project.

3. Do I have a good team?

Architect, surveyor, bricklayers, plumber, electrician, building engineer, notary… And that’s just a few of the professionals you’ll need to hire when building your house. You need to select them (meaning checking their permits, references and reputations), evaluate their bids and choose professionals with team spirit, since self-construction is a collective effort. There’s the added challenge of managing everyone’s availabilities to ensure a smooth schedule. If your electrician is waiting for the walls to go up, it’ll cost you!

4. How can I pay for it?

Of course, you need to do more than show up at your bank with plans signed by an architect to walk out with a cheque for hundreds of thousands of dollars.

Self-construction projects undergo a thorough analysis before they can be approved by an advisor specialized in real estate, who will guide you through the credit approval steps and the list of documents to provide for your financing application.

What’s more, in addition to a minimum down payment, you need to provide proof of liquid assets for the bank to be sure that you can take on all of the payments required to order materials. The client is required to have enough liquid assets to make up for the difference between the real cost of their project and the amount to be financed, confirmed by a certified appraisal by the financial institution or the value recognized by the mortgage loan insurer.

After an inspector who is certified by the financial institution checks the construction’s progress and quality, funds will be gradually disbursed to cover for the project’s financial needs.

Lastly, a holdback for construction liens and material suppliers is required as a security for each disbursement as the work progresses. It will be released once the work is completed.

There’s no doubt that self-construction is a big job. Are you ready? Is this the right project for you? After all, not many people can say that they’re 100% satisfied with their homes!

1. Source: Maison Construction

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