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Things to consider before deciding to build your own house

06 May 2018 by National Bank
build your own house

Looking to take on the challenge of building your own home to save on construction costs and oversee the process from start to finish? Building your own home is an exciting project that requires a lot of time and energy. Learn more before you put the first shovel in the ground.

1. Are you up to the task?

Building your own home is exciting. But to do it right, you need a lot of time and a particular skill set. Do you have between 20 and 30 hours a week? That’s how much time you need to devote to the project to get it done—you need to clear enough space in your schedule to fit in the equivalent of a part-time job, during business hours.

Managing this kind of project means you’ll be making lots of decisions every day, and each one will affect whether the project stays on budget and schedule. Even if you decide to hire a general contractor to take on some of the tasks, you still have to be ready to assume an enormous amount of responsibility for yourself, your family and everyone working on the project.

Opting to build your own home is more than just a financial decision—it will take over your life for many months.

2. Do you know all the steps the project entails?

Building your own home involves two major phases: planning and construction.

Planning phase:

  • Set an initial budget
  • Develop the plans
  • Get a cost estimate
  • Request and obtain estimates that include a detailed list of materials
  • Get a site plan indicating the placement and orientation of the future home on the property
  • If needed, get soil and/or water quality tests and studies
  • Get a building permit from the municipality to make sure the project complies with existing regulations
  • Get a survey certificate
  • Finalize the budget and secure the financing
  • Get a public liability insurance policy for the duration of the project (strongly recommended by the Régie du bâtiment du Québec)
  • Choose suppliers

Construction phase:

  • Excavation
  • Foundation
  • Framing
  • Roofing
  • Doors and windows
  • Siding
  • Mechanical systems (plumbing, electricity, heating, ventilation and air conditioning)
  • Insulation
  • Drywall
  • Painting
  • Interior moldings and other finishing work
  • Flooring
  • Cabinets and countertops

The work usually takes about six months to complete. However, it is not uncommon for it to take longer. At National Bank, a maximum of 12 months is allocated to building your own home.

3. Do you have the right team?

You can’t do it alone: you’ll need a team to build your house. Here are some of the professionals you’ll need:

  • An architect or an architectural technologist to design the drawings
  • A construction estimator to estimate the costs
  • A surveyor for the site plan
  • A building engineer
  • A mason
  • A plumber
  • An electrician
  • A notary
  • A banker
  • An insurer

Before construction begins, you need to identify potential suppliers, assess their estimates, and then choose which ones you’ll use after you have verified their references, reputations and permits. Some of the work must be done by specialized subcontractors licensed by the Régie du bâtiment du Québec, particularly for any electrical work and gas installations.

If you get your friends or family members to help, they may be considered as salaried employees who need to have a competency certificate from the Commission de la construction du Québec.

Anyone who works on the site must be a team player who doesn’t just pass the buck when problems arise. You will also need to make sure they are available when you need them so that you can do each step of the construction process in the right order and stay on schedule. You’ll need to play the role of conductor throughout the entire project to keep it all on track.

4. How will you finance your project?

Many people choose to build their own home to save money. On average, it costs 30% less than a similar turnkey house.

This savings, however, should not be used to minimize the costs of building your own home. After buying the land and paying for the notarial deed, an initial typical construction budget can be broken down as follows:

  • 30% to 35% to excavate and lay the foundation
  • 30% to “lock-up” the house
  • 10% to build the walls and ceilings
  • 25% to 30% to install the plumbing, electricity, gas; connect to public services; and install the stairs, doors and windows

In addition to the direct costs of labour and materials, you need to think about the indirect costs: permits and certificates, notarial fees, insurance, transfer tax, etc. In a DIY budget, it’s a good idea to set a 15% safety margin for unexpected expenses.

All costs need to be estimated and calculated very precisely. You cannot simply present an architect’s plan to your financial institution and hope to receive a cheque for several hundred thousand dollars in return. This type of project is subject to a thorough analysis prior to approval by a real estate advisor who will guide you through the credit approval process and give you a list of documents to put together for your financing application.

In addition to the minimum down payment, you must provide proof of funds to show you will be able to make all the payments necessary to order the materials.

You will also need to have sufficient funds to bridge the gap between the actual cost of your project and the amount financed by your financial institution. The full cost is confirmed by certified appraisal or by the value recognized by the loan insurer.

Once the loan is granted, your financial institution will send a certified inspector to visit the site to validate the quality of work and its progress, and the money will be disbursed gradually to meet the financial needs of the site.

A holdback will be required on each disbursement as a guarantee against a builders’ or suppliers’ lien. This holdback will be released once the work is completed.

And remember—you may also be entitled to a partial tax rebate. For GST purposes, the fair market value of the property must not exceed $450,000 and the amount of the rebate can be as high as $6,300. As for the QST, the maximum admissible value for the property is $300,000 and the amount of the rebate varies according to the date on which the building permit was issued.

Don’t let all these details and requirements discourage you. Building your own home is an exciting adventure and a one-of-a-kind experience. If you do your homework and put together a good team, you can build your dream home yourself.

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