Building a new home is a super exciting endeavor as you opt to create the perfect space for you and your family. However, building a home is not without its costs and potential surprises… to mitigate bumps on your homebuilding journey and avoid costly mistakes, consider the following tips:

Set a Realistic Budget

When building your own home, it is vital to be realistic about your budget and what you can afford. Making a list of wants versus needs can be a good way to determine what is required, and where you can spend extra money should your budget allow for it. When constructing your budget, don’t forget to include construction costs from materials to labour, as well as permits, inspections, landscaping and unforeseen contingencies. The contingency fund should be approximately 10-15% of your budget put aside to cover unforeseen issues or changes.

Hire Reputable Individuals

From your architect and your contractor to your landscaper and inspector, it is vital to have the right people in the right positions. This will ensure that you not only get the best advice, but experienced individuals will also help to steer you through the process and mitigate potential issues. Be sure to do your research, ask for references and ensure the individual(s) you hire are licensed and insured.

While you’re researching individuals, it can also be a good idea to get multiple quotes. While you may have a contractor you like, reaching out to other individuals can help ensure you’re getting the best rate.

Review Contracts Carefully

Read and understand all contracts and agreements thoroughly between your contractor and yourself, your designer, your home inspector, etc. Ensure that everything is in writing and that you and your builder are on the same page regarding expectations, timelines, and costs.

Make and Follow Your Plan

Once you have your budget and the right people on the project, it is time to make a plan. You must work with an architect or designer to ensure that your new home aligns with your needs, lifestyle and budget. This should also include future plans – do you want to have children? Plan on adopting a pet or two? Possibly need space for an older family member in a few years? Getting this right from the beginning will help to avoid potential changes to the plan down the line, which will reduce expansions to cost and timelines.

Choose Your Materials Carefully

Choosing to invest in energy-efficient features and materials can help you to reduce long-term utility costs. While initially these installations may be more costly, they will work to save you money in the long run. Whenever possible, make sure these materials are also as durable as possible to ensure longevity and low maintenance requirements.

Secure the Necessary Permits

Ensure that you obtain all required permits and approvals before starting construction. One of the most important reasons to do this is to ensure that the work being done is safe, but having permits and inspections is also vital to ensure you can get insurance on your new build. Non-permitted renovations or build additions, changes, etc. can result in trouble securing insurance, on top of fines and other potentially costly issues.

Invest in Inspections

Having inspections done throughout the process of building your home can save you issues down the line by ensuring that all the installations are done correctly and safely and that your house meets the proper codes for electrical, plumbing, etc.

By taking proper steps and being proactive throughout the home-building process, you can minimize the risk of costly mistakes and ensure that your new home meets your expectations while staying within your budget.

Written by DLC Marketing Team

November is Financial Literacy Month and we have the tips to ensure your financial game is on point this Fall as we head into the New Year!

Nail Down Your Budget
Understanding the basics of budgeting and tracking your income versus spending is a fundamental part of financial literacy and control. Building a budget can help you define your spending habits, and determine where there is room for adjustments, and this gives you a chance to review your cash flow situation to ensure it aligns with your financial goals.

Ideally, your budget will fall close to the range of the following:

• 32% of your income for housing, including property taxes, maintenance, utilities, etc.
• 26% of your income for life, including groceries, medical, childcare, vacations, fun, etc.
• 16% of your income for transit, including car payments, bus passes, gas, etc.
• 16% of your income for debt, including credit cards, lines of credit, loans, etc.
• 10% of your income for savings, including long-term planning, retirement, etc.

DOWNLOAD OUR FIRST HOME BUDGET TEMPLATE!

Dedicate Your Savings

Many individuals will have a savings account that is connected to their chequing account. This can be a bad habit, as it becomes too easy to use your savings account as a second account versus as a dedicated account for emergencies, vacation planning, or more. Ideally, you are putting 10% of your monthly income into savings whenever possible.

Live Within Your Means

This one seems simple, but it is surprisingly difficult to do – especially if you don’t have a proper budget! By putting together a budget as mentioned above, you can see where you are spending your income and how it compares to what you are bringing in. Ideally, you are adjusting your spending to ensure that you are not going over the cash flow available to you with priority expenses first, followed by leisure.

Understand Your Banking Options and Interest Rates

Having a loan with a 16% interest rate, a credit card that you’re barely making payments on, or a savings account that doesn’t give much back are all areas for consideration when it comes to truly understanding your options. Sometimes a different bank, account type, or loan type can make a big difference to your financial position. There are plenty of options, especially at mortgage renewal time, for consolidating your debt, changing your mortgage, getting a better interest rate, and more!

LEARN MORE ABOUT CONSOLIDATING DEBT!

TIPS TO PAY OFF YOUR MORTGAGE FASTER!

Check Your Credit

An annual review of your credit score and credit report is a huge part of financial literacy as this plays a key role in your overall financial status. Your credit score affects your loans, credit cards, mortgages and the interest rate you can qualify for so be sure to understand where you fall on the scale.

GET HELP UNDERSTANDING YOUR CREDIT SCORE!

Plan for Big Expenses

Are you looking to replace your car? Planning a family vacation? Need to renovate your kitchen or replace some furniture? These are all typically larger expenses that should be planned for in advance. While sometimes an appliance will break and need to be replaced, the goal is to have funds in your budget (or savings) for when things come up unexpectedly but also to plan out spending before large purchases or bookings. This ensures that when you get on that plane or drive off that car lot, you know you’re already paid!

Review Your Financial Progress

A lot of people set up a budget but then they don’t update it! Ideally, if any of your expenses change, such as an increase to your streaming services bill or utilities go up, you are updating your budget in real-time to ensure that you are keenly aware of what is coming into your account and going out. Generally, an annual review is a good idea for an overall clean-up of your budget but keeping it maintained all year long will help you get the best picture of your financial situation.

Stay Informed

When it comes to financial literacy, knowledge is power. With so many resources by your side from your mortgage broker to our Enriched Tips, Economic Insights and more it is easy to keep your finger on the pulse and be mindful of current economic changes, as well as new products or opportunities such as 40-year amortization mortgages!

Whether you’re new to financial literacy and budgeting, or simply want a refresh, taking control of your finances and better understanding your spending, cash flow and options will help you get the most out of your income!

Get to know the important basics before you choose your mortgage.

You have to be sure you select what is most important to you – lower rates or flexibility. Before you choose a mortgage, take some time to study mortgage types:

Closed Mortgage: If you want consistency with respect to rates and the length of your mortgage agreement, a closed mortgage is best for you. Interest rates are typically lower (and do not change with the length of the term). However, a closed mortgage does not offer much flexibility in paying off your mortgage sooner – with the exception of a once-a-year lump sum payment up to 20% of your entire mortgage.

• Predictability and consistency with respect to payment amount
• Often comes with lower interest rates
• Limited flexibility with paying down the mortgage faster
• Cannot change interest rate during the term of mortgage

Convertible Mortgage: Want the best of both worlds? Then consider a convertible mortgage. Convertible mortgages are flexible yet offer minimal risk. Often with a lower interest rate than an open mortgage, convertible mortgages provide the opportunity to switch to a longer-term closed mortgage without penalty.

• Provides an opportunity to take advantage of lower interest rates and switch to a closed rate without penalty
• Offers lower interest rates than an open mortgage

Open Mortgage: If you are looking for flexibility with regard to paying off your mortgage, consider an open mortgage. No penalty is incurred if you decide to make lump sump payments or pay off your mortgage before the term expires; however, this flexibility comes often with a higher interest rate – which can result in higher monthly payments.

• Maximum flexibility; no penalty for making lump sum payments or paying off your entire mortgage before the term expires
• Higher interest rate
• Best for those looking to pay off their mortgage as soon as possible

Still not sure which type of mortgage is best for you? Contact a DLC Mortgage Expert today!

Written by DLC Marketing Team