We address three steps required for home builders, from planning financing to insurance.
Step 1: Planning
- The first step is to evaluate your financial capacity. Committing to building your own home requires certainty that you’re able to supply the necessary funds.
Our How much can I afford to spend on a home? tool can help you get an idea of your budget. When you’re sure of your financial capacity, you can begin to plan.
- Your plans and specifications are not only essential for the construction of your home, but they’re also required for credit and municipal approval. Be sure to have a specialist help you draw them up according to the building code in Ontario.
- Choose the type of house and land that suits your tastes and needs. The price of land should ideally not be more than 25 – 30% of the total cost, and its distance to work, public transit, schools, grocery stores, etc. should fit your lifestyle. Also consider the impact of municipal taxes on your budget.
- To ensure your project doesn’t infringe upon any municipal regulations, you must get the required authorizations and construction permit from the city.
- Building your own house doesn’t require you to have any license, but make sure the workers you recruit have their construction qualification cards that meet regulations in your area.
Step 2: Budget & Financing
Before you begin looking at financing, prepare your budget. Whether you’re buying a home or building one yourself, your total housing costs should not exceed 32% of your household’s gross monthly revenue, and no more than 40% of your revenue should go to repaying your debts.
Typically, the following average percentage costs apply to each step of the construction process:
- Excavation and foundation (30% of total costs)
- Framing and closing-up, such as windows, stairs, roof, electricity, exterior finishing, etc. (30% of the costs)
- Installing drywall (9% of costs)
- Finishing, such as cupboards, bathroom fixtures, flooring, painting, landscaping (28% of costs)
After your project and budget are prepared, make an appointment with a financial advisor. He or she will help you define your mortgage needs, and apply for a mortgage as quickly as possible. Bring copies of your plans and specifications, a detailed estimate of costs with a backup documentation, and the construction schedule.
Step 3: Insurance
Don’t take the risk of letting an accident endanger your project while it’s being built, or after it’s been completed. A home insurance policy customized to meet your needs is the best way to be sure your home is protected, every step of the way.
During construction we recommend having civil liability insurance to protect yourself and your workers in case of an accident. Once built, it’s essential to have proper coverage for your most precious asset.
Desjardins Home insurance includes a basic all-risks policy covering loss due to the majority of accidents that cause damage to your home or property, but you can also add optional clauses for specific needs, such as aboveground water damage or an aboveground pool. Request an online quote to determine which type of coverage is best for you.
Lastly, take measures to protect your ability to meet the financial obligations of building a home. With loan insurance, your payments can be taken over in trying times.
Building a new home, which takes anywhere from 5 – 7 months, requires endurance. The solid foundation of a proper plan will give you peace of mind that your project will be completed successfully.