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Costs involved in building a house

Costs involved in building a house

Old Mar 13th 2009, 2:19 am
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Default Costs involved in building a house

Ok, so I typed all this out before Expats went down and lost the whole bloody thing... lesson learnt.

Anyhoo, I'll try and remember what I said!

I've done a fair bit of reading etc into building a house here and obviously I know there are going to be costs that creep in that we won't have thought about so I thought I'd ask for those who have been through the building process to see what we're missing. I've set out below the costs that I'm aware of:
  • Deposit on Land
  • Balance of Land
  • Soil testing costs (some builders websites indicate that cost is generally included in the cost of the house, is this correct? If not, how much should we be expecting to pay for this?)
  • House base price (are you generally expected to pay a deposit on the house, at what point do you pay this and generally what % would it be?)
  • Any additional inclusions for the house (I've read on here that we should generally factor in at least 10% extra for our personal specifications. Is this 10% of the entirel house and land package or the house base price?)
  • Mortgage annual fee
  • Mortgage settlement fee

I can't find any info on the legal costs involved although I'm sure there are plenty. Do you need a solicitor like you would if you were buying an established home? Could somebody expand on this for me?

As for amenities, from what I can tell, your basic connections (i.e. electricity, gas and water) are connected by the builders (correct?). Also, aside from those bills generally accrued through renting, the only additional outgoings we will have are buildings insurance and water/sewerage rates..? Is there any such thing as Council Tax or rates in Oz?

Also, I know I'm asking a lot but if anyone can give an indication of at what stage we should be expecting to pay for everything, or perhaps even their own timeline with regard to paying for stuff.. that would be very helpful to me.

Sorry if I'm rambling or being a bit naieve but we need to bear all these costs in mind before we put ourselves in a difficult position financially! We don't want any particularly big, unexpected bills along the process - I hate nasty surprises!!!

Hope you can help!

Last edited by FluffieFaerie; Mar 13th 2009 at 2:22 am.
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Old Mar 13th 2009, 2:42 am
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Default Re: Costs involved in building a house

Originally Posted by FluffieFaerie
  • Deposit on Land We put $1000 down on our land but paid a shed load off between the titles coming out and when our mortgage kicked in.
  • Balance of Land This was included in our mortgage
  • Soil testing costs (some builders websites indicate that cost is generally included in the cost of the house, is this correct? If not, how much should we be expecting to pay for this?) Ours was included up to a maximum of $1000. Anything over that and we would have had to pay. Anything less gets refunded back at the end of the build along with anything else not used by the builder.
  • House base price (are you generally expected to pay a deposit on the house, at what point do you pay this and generally what % would it be?) We put $1500 down. That was for them do initiate the contract and do the engineered drawings, submit the plans to the shire for approval and everything else needed doing until the mortgage started. Some builders require less, others more.
  • Any additional inclusions for the house (I've read on here that we should generally factor in at least 10% extra for our personal specifications. Is this 10% of the entirel house and land package or the house base price?) I would say closer to 20% of your house price. As an example, our base price for our house was $146000 however when it's all said and done the actual cost of the finished product (move in condition) will be closer to $180000
  • Mortgage annual fee Negotiable with lender. Find a good mortgage broker and they can either negotiate it for you or you tell them you want it included in their fee.
  • Mortgage settlement fee Mortgage broker will let you know how much this is. It all depends on your lender, amount you borrow, and a shedload of other factors.

I can't find any info on the legal costs involved although I'm sure there are plenty. Do you need a solicitor like you would if you were buying an established home? Could somebody expand on this for me? Yes. If you have not done it before and are not 100% certain about the process I would say get a conveyancer. You don't need a solicitor, but there are plenty of conveyancing firms out there to take care of all the legals for you. I think ours was about $700.

As for amenities, from what I can tell, your basic connections (i.e. electricity, gas and water) are connected by the builders (correct?). No. You have to set up the accounts and pay the bills while the build is going on. Well, at least we did.

Also, aside from those bills generally accrued through renting, the only additional outgoings we will have are buildings insurance and water/sewerage rates..? Is there any such thing as Council Tax or rates in Oz? Yes. You will be required to pay council rates. It is less during the build of course than after since the rates are based on the value of the property. Obviously once a house is on the land it's worth that much more.

Also, I know I'm asking a lot but if anyone can give an indication of at what stage we should be expecting to pay for everything, or perhaps even their own timeline with regard to paying for stuff.. that would be very helpful to me. We're at the bricking stage now. We paid our deposit on the house and land in May 2008 but due to delays by the shire and the state our land was not titled until late October. That meant that everything was on hold until then. In the meantime while we waited for titles we got our mortgage broker to arrange our financing. I believe it was late November or early December when we started paying on our mortgage. We are building through Keystart, which is a WA government initiative where we only pay $100 every fortnight toward the mortgage while the house is being built and once handover occurs we pay the whatever the mortgage would cost anyone else. The downfall is that we have to pay (I think) .5% higher interest than we could get from the bank and we are locked into Keystart for the first 2 years - we can't change to a lower rate mortgage.

Basically, you will pay a deposit when you put in the offer on the land and when you sign up with a builder. You then arrange your finance and don't pay again until you take possession of the land. That is when the lender gives $$ to the developer for your land and the first payment to the builder. During the build you will make "progress payments". That means that the builder will come to you and say 'Ok, Mr & Mrs Fairie we are at the plastering stage and need X amount of money from you.' You then go to your lender and let them know to release X dollars to the builder and you add that amount to the mortgage payments. The amount you will be repaying increases as the build progresses, since your lender would have given more and more money to the builder.

I'm not sure about Queensland, if it's different to WA, but our experiences so far are above in red. Building is NOT cheap if you are paying rent at the same time since you are in effect paying a mortgage and rent at the same time. Talk to a good mortgage broker to see if there are any programs in Qld like the Keystart one here. We could never have afforded to build if not for it.

Once I have more to show I may start a "house build" thread.
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Old Mar 13th 2009, 3:15 am
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Default Re: Costs involved in building a house

Hi we are only so far down the road with this but can tell you what we have experienced so far.
Bought the land - 5% deposit the rest on settlement.
Mortgage Registration Fee $92
Transfer Conveyance Registration Fee $92
Loan Establishment Fee $600
Conveyencer Fee $990 - Only needed her for the land, she said she was not needed for house build.
We become Liable for the rates once the land is settled. (but not sure yet what that will be exactly)
Builders Costs - Initial payment of $1500 paid for contour site survey and soil testing. If your soil testing comes back with a poor result your building cost may increase.
A further $1500 to get them to prepare your final contract. (we had 2 preliminary contracts prior to getting to this stage, to ensure that you have all the choices/selections that you want made. Not done his yet but 5% paid deposit when signing the contract. It is virtually impossible to say how much you will spend on your personal specifications, that is largely determined by your budget and what you want to include, I would say 10% is quite low, but we got them to spec the house virtually as the display was so we could then work backwards take things off based on what we considered to be a priority to us.....unfortunately most things now seem to be a priority
There are so many things that do not come in the standard house price and don't forget drives & paths unless otherwise quoted, boundary fencing, landscaping.
You will need to be prepared to pay for removal of on site rubble, rocks tree stumps. Retaining walls if your land has been cut and filled.
That is as far as we have got, ....and where where we will stay until the house in UK sells It is exciting though when you get you prelim contracts through showing your house on your block. Good luck.
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Old Mar 13th 2009, 3:22 am
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Default Re: Costs involved in building a house

Originally Posted by Dorothy
Building is NOT cheap if you are paying rent at the same time since you are in effect paying a mortgage and rent at the same time. Talk to a good mortgage broker to see if there are any programs in Qld like the Keystart one here. We could never have afforded to build if not for it.

Thanks Dorothy. This is my biggest concern really. I'm not actually convinced we can afford to build and rent at the same time, at least, not for months and months and months, maybe six at a push. We're having a chat with a mortgage broker tomorrow so I'll see what they say. In the meantime, if anyone does know of any schemes such as the WA Keystart one, I'd be grateful to know about them. Thanks.
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Old Mar 13th 2009, 3:51 am
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Default Re: Costs involved in building a house

Originally Posted by FluffieFaerie
Thanks Dorothy. This is my biggest concern really. I'm not actually convinced we can afford to build and rent at the same time, at least, not for months and months and months, maybe six at a push. We're having a chat with a mortgage broker tomorrow so I'll see what they say. In the meantime, if anyone does know of any schemes such as the WA Keystart one, I'd be grateful to know about them. Thanks.
Hello fluffiefaerie, I read one of your earlier posts where you talked about wasting a lot of rent money over 5yrs when you could be paying off a homeloan.

Your point is fundamentally correct. But there are other things that I would consider, if I were in your shoes....

1) house prices : are they likely to keep going up? or stay flat ? or drop? If the answer is stay flat or drop, then it is better to carry on renting as the cost of renting is cheaper than the cost of owning. In the mean time I can save money (because I won't be spending those extra $$$ on home ownership) and I can increase my deposit.

2) interest rates : are interest rates likely to go up or down in the short term? how about the long term? If I take out a variable loan over 30 years, I need to be pretty certain that I can take the rough with the smooth....e.g. I shouldn't be planning for 5% interest rates to carry on forever.... I need to think carefully about how I would cope if rates went up to 8%,10% or even 12%. If the answer is "I would struggle but I'd scrape through" then good. But if the answer is "there's no way I could possibly cope" - then I need to save a bigger deposit and bide my time for a year or two.


All I'm saying is - be careful about entering into big commitments. The best time to buy a house, in my opinion, is when (a) you have a deposit and you are pretty certain you can afford the repayments, in good or bad times, and (b) you reckon the house you are getting is a good deal.

I know I'm going off topic on your thread but I just think that the whole concept of renting being "money down the drain" is just something that is pushed upon us by the real estate & finance media. Paying astonishing amounts of interest over 30yrs - now that is money down the drain. Buying a house but then not affording repayments is money down the drain. Renting and saving a good deposit is the way to go !

Just my opinion though, best of luck with whatever you decide to go for!
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Old Mar 13th 2009, 4:43 am
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Default Re: Costs involved in building a house

Thanks everyone. I've actually managed to convince myself over the past hour (whilst doing the housework for once in my life!) that we're nuts to even consider building at the moment. Maybe one day in the future on a joint income but right now we'd be absolutely murdering ourselves financially.

I'm going to look briefly into already established housing but essentially I think we're just going to have to stick to the original plan of renting long-term. I don't know.

I think in all honesty I've just got itchy feet again. It seems I can't go for 6 months without a something big on the horizon and with this baby about to make an appearance I'm looking for my next project!
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Old Mar 13th 2009, 4:48 am
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Default Re: Costs involved in building a house

Originally Posted by asprilla
Renting and saving a good deposit is the way to go !
So what do you do if the cost of rent is the same as what your monthly repayments would be (on a fixed mortgage at current rates) but on a single income you simply don't have the disposable income to save a deposit..? We could raise the deposit by selling one of our cars now and replace it with the home owners grant when we get it. We could still be renting in 5 years time with absolutely zero deposit despite our best efforts. I can't see how we've gained anything by doing that. I don't know, I'm confused!
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Old Mar 13th 2009, 5:35 am
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Default Re: Costs involved in building a house

Originally Posted by FluffieFaerie
So what do you do if the cost of rent is the same as what your monthly repayments would be (on a fixed mortgage at current rates) but on a single income you simply don't have the disposable income to save a deposit..? We could raise the deposit by selling one of our cars now and replace it with the home owners grant when we get it. We could still be renting in 5 years time with absolutely zero deposit despite our best efforts. I can't see how we've gained anything by doing that. I don't know, I'm confused!
Well you've got a very good point...

With regard to your point about the cost of rent = cost of ownership and not being able to save....well, that might be the situation as of today. But - it might be very different in 1yr's time. Renting could be cheaper, interest rates higher, your income(s) higher, etc etc.....your income and expenses will change over the next 5yrs, they will not remain constant. Some of these changes you can influence, and some of them you can't. Saving might seem impossible at the moment but it might be possible in the future.

If you had a crystal ball and house prices were going to double over the next 5yrs, then there is no question what you would do. Similarly if house prices were to drop and your home would be 55% (!) cheaper to buy in 2014, well you would rent for another 5yrs and buy!

But without a crystal ball, you'll never know. So you have to carefully weigh up the risks of rent v ownership and make the best decision for yourself.

I will try and write a better more detailed response this weekend...

see ya!
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Old Mar 13th 2009, 6:45 am
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Default Re: Costs involved in building a house

Has anyone done a self build in perth i am thinking about it,I am a plumber being here a couple of years so i know how they "throw" them up here.Wanting to know about costing for plans and permits and the potential saving as opposed to going with a builder,as we did before and was not happy at all with intrenal finish and the basic nature of the product.Any advice welcome.
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Old Mar 17th 2009, 5:42 am
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Default Re: Costs involved in building a house

Originally Posted by FluffieFaerie
So what do you do if the cost of rent is the same as what your monthly repayments would be (on a fixed mortgage at current rates) but on a single income you simply don't have the disposable income to save a deposit..? We could raise the deposit by selling one of our cars now and replace it with the home owners grant when we get it. We could still be renting in 5 years time with absolutely zero deposit despite our best efforts. I can't see how we've gained anything by doing that. I don't know, I'm confused!

Hi fluffiefaerie, I was just thinking about this post again. You said that the cost of your rent would be the same as monthly repayments "on a fixed mortgage at current rates".

Did you mean, taking the current variable rate (lets say 5%) and then fixing it for a period?
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Old Mar 17th 2009, 6:07 am
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Default Re: Costs involved in building a house

Originally Posted by FluffieFaerie
Thanks Dorothy. This is my biggest concern really. I'm not actually convinced we can afford to build and rent at the same time, at least, not for months and months and months, maybe six at a push. We're having a chat with a mortgage broker tomorrow so I'll see what they say. In the meantime, if anyone does know of any schemes such as the WA Keystart one, I'd be grateful to know about them. Thanks.
The Qld housing department website came back with this for their home loans.
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Old Mar 17th 2009, 9:23 am
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Default Re: Costs involved in building a house

The best site for information about building a house in Australia is http://forum.homeone.com.au

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