Home prices are soaring high this year, and experts suggest that one of the best ways to avoid this price increase is to build your own home. You can prevent the possible auction cost by doing this and also have a home that looks exactly like in your dreams. However, you can also quickly burn through your budget if you’re not careful.
There are now many ways for you to build a home cheaply during this pandemic. By utilizing these tips, you should avoid the considerable cost of owning a home today. Let’s start with something you might already know: construction loan.
Construction Loan
A construction loan is a kind of loan you get if you want to construct your home. It’s as simple as that, but people tend to mix mortgage and construction loans. Although some construction loans eventually turn into mortgages, a construction loan and a mortgage are not inherently the same. Let’s go through the different but common forms of construction loan that is available to the public.
Construction-only Loan
If you only want to pay for the construction costs of your home and have the money to pay for it in cash in the future eventually, then this choice is for you. You need to have saved up a lot of money for this, and it’s great for people who are selling their new home. Once you’ve sold your new home, then you can quickly pay the loan with cash.
Construction-to-Permanent Loan
This kind of loan ties both mortgage and construction loans together. At first, you pay the loan to start the construction of your home. Once your contractor has finished building your home, the loan then turns into a mortgage at a fixed rate price. This sounds great for those who want to claim their constructed home without the use of cash immediately. It’s also great for saving money on a mortgage.
Renovation Loan
This loan is for fixer-uppers, which we recommend if you want to avoid the ridiculous home prices available this year entirely. What you have to do is buy a fixer-upper home (the cheaper, the better) and get a renovation loan to fix it up. You can bypass the six months of building a house and turn it into only two to three months. Plus, you get good savings as well.
Purchase a Cheap Piece of Land
Many experts believe that most people can build their dream homes cheaply by buying cheap land. Currently, agricultural lands are one of the most affordable in the US, costing only $3,000 per acre last year. Sure, it might be away from urban life, but if you want to become a farmer at some point, this is a good choice for you.
Stop looking for land inside cities. Instead, look for land outside one because there are also some lands near urban areas. In some cases, cheap land might require you to excavate some of the rocks on top of it. For this, feel free to contact excavation companies like Rykstone Construction to help you out. These companies can make excavating and developing your land a breeze and at a much lower price.
Get Your Lender or Bank to Co-invest With You
A new trend that’s getting a lot of people’s attention is the idea of their lender or bank to co-invest with them in a home. The entity can home a part of their home in exchange for a better home price and convenience.
This new trend comes in a variety of forms. The most common is that both lender and homeowner get an equity share in the home. The more the homeowner pays their monthly dues, the more equity they can gain. This completely removes the need for a mortgage. If you need some fast money, all you have to do is sell some equity to your lender. It’s a convenient and straightforward version of home loaning.
However, as good as it sounds, it might be problematic for those desperate to stay in their homes, despite not having enough money to pay for it. They would keep selling a part of their share to the lender to get some cash. This is until they have entirely diluted their share, and the lender can kick them out. Our suggestion is to purchase a home this way if you have some excess cash.
Final Thoughts
These are some ways you can cheapen the construction of your dream home. Remember that it all depends on the house you have in mind. If you’re planning to build a mansion, don’t expect these things to save you some cash. It’s only for those who want to build a humble home amidst the pandemic.