Building vs buying a home – a quick look at the pros and cons
If you’re not sure which option is best for you (and your finances), we’ve got a couple of factors to help you decide.
Buying a ready-made home has its advantages. Utilities and fixtures will already be in place, and naturally, it’s less expensive.
Building a new home costs, on average, 20-30% more than buying one, but it comes with a couple of major plus points (and savings) too, including:
- Saving on transfer duty, a tax which is not charged on newly built homes.
- You can claim depreciation on taxes.
- You’ll save on maintenance costs.
- You can have the home built to your exact specifications, which you and the developer will agree on beforehand.
- The home can be built with modern energy and water-saving features in place.
On the other hand, you face the challenge of finding a plot of land. This can be difficult in certain neighbourhoods. You should employ an estate agent to advise you on this.
Additional costs of plot-and-plan to consider:
- The cost of hiring an architect to plan the development. Architects typically charge 5% to 15% of the construction cost, or they charge an hourly rate (R750 to R1800 on average).
- The cost of having plans drawn up. You pay an architect or draftsman per hour to draft the blueprints.
- The fee for submitting the building plans to the council for approval.
- Finding a trustworthy builder. Note that any builder must be registered with the National Home Building Registration Council (NHBRC). Make sure your developer is before making any agreements.
- The cost of having utilities such as water, electricity and plumbing connected.
- Rates, taxes and levies, which you are responsible for on a plot of land that you own.
Getting a home loan on a construction project
Applying for a building loan is a similar process to applying for a home loan, with the difference being that the bank pays out the loan in stages rather than all at once.
Whether you’re applying for a building loan or a home loan, ooba can assist you by submitting your application to multiple banks, thereby helping to secure you low interest rates. They also offer a range of tools that can make the home buying process easier, starting with their Bond Calculator and then the Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home or building loan.
