Think about how many floors you need, what area your home should have, what the layout of individual rooms should look like. The number of square meters plays a key role in the cost of construction or when planning the renovation of an apartment, so it is worth optimally planning the space and if you are not an expert – use his help, because mistakes can cost you a lot.
After preparation of the project, take care of the initial cost estimate of building the house, thanks to which you will know in advance how much money you need and how much (if any) you need to take in the loan. A ready project is also the right time to try to get permission for the necessary connections. You must obtain a building permit. Without these documents, a mortgage application for house construction will not be accepted.
The cost of building a house – loan financing
If you want to take a loan for the construction of a house, you will need its design, building permit, excerpt and plot for the plot from the land and building records, as well as the property deed. You have to take into account that the cost of building a house is not always equivalent to the amount of credit that the bank will give you. You must consider the amount of your own contribution. When applying for a loan, you must provide a construction cost estimate with a written work schedule.
The bank pays the first tranche of the loan after the borrower’s own funds have been settled – the settlement takes place according to the work schedule. The tranches awarded by the bank can be settled in two ways:
- based on paid invoices for building materials and labor,
- based on the as-built cost estimate and photo inspection of the property – construction progress is verified and photographed by a bank employee.
Estimated calculations – how much does it cost to build a house?
By accepting your home loan application, the bank calculates the minimum value of the newly built property. It does this on the basis of the estimated construction cost of 1 m² of the building – this is the average cost of construction, and its value in various banks is at the level of USD 1,900 – 2,700, which means considerable discrepancies.
Usually, the bank takes into account the usable and total space. Assuming that the total area will be 100 m², the price of building a house can be 190 – 270 thousand. USD.
Home construction loan – loan payment and repayment
If the bank issues a positive credit decision, a loan agreement is signed, and then, according to your work schedule, the first cash tranche will be paid out. The bank will never pay you the full amount once.
You will get it at intervals as the work progresses. Each time settlement is made from the previous tranche. The number of tranches is determined individually with the bank – their amount may be equal, but the amounts may also differ.
The repayment of capital is suspended during construction, which means that you only pay interest installments on the capital paid out. You start paying off your capital when construction is complete or on the date you set out in your home loan application.
And what to do with the cash that was not used when the construction cost turned out to be lower than assumed in the cost estimate? Nothing prevents you from using it to pay off your loan. You can also use the excess loan to equip your home.
Cheap houses under construction – simple and practical projects
The house design can be adapted to your preferences and financial possibilities. It is worth to bet on cheap houses under construction with a simple block and smaller area. There are many ready projects of various sizes on the market. In addition, a cheap house under construction is also an economical house in terms of maintenance.
Minimalist designs are fully functional and can delight with aesthetics. If your financial situation does not allow you to build a large house according to your own design, consult a bank advisor whether you can get a loan for a cheaper investment.