Is it Cheaper to Build or Buy a House?
One question often confronting home buyers is: would it be less expensive to buy a pre-existing home, or should I purchase new construction? Even if price is the only determinant, the answer may not be as clear-cut as you might think.
First, know what you can comfortably afford. Use one of Ark’s mortgage calculators to determine your maximum affordable payment (MAP). Then select a mortgage lending bank like Ark Mortgage to arrange for financing so when you determine which type of home you want and the mortgage services you need, you’re ready to act quickly.
Next, recognize that it is cheaper initially to buy a pre-existing house. If you buy a new house, the median sale price in the U.S. was $322,500 in December 2016, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development; the median price homebuyers paid to buy an existing home was $232,200 in the same month, according to the National Association of Realtors.
Obviously, prices vary depending on location—New York/New Jersey metropolitan area homes tend to run higher than other parts of the country. See Realtor.com for prices per square foot in your area. Other factors affecting price: design, labor, materials, interior and exterior finishes, size of plot and more.
It’s important to keep these points in mind when deciding between purchasing new and pre-existing construction:
- You can save up to 20% on new construction by considering modular or prefabricated homes (manufactured offsite and assembled on location) or homes in developments (up to a 15% savings) instead of custom-built homes.
- Remember that odd-shaped rooms increase the cost of construction if you do choose a custom-built home. The more corners involved, the higher the price. Not to mention the financial outlay for design professionals, whose efforts could tack on an additional 10%-17%.
- New construction does have its perks. Not only can you put your personal touch on construction, your home will generally have only the features you request, so you won’t be paying for something you might not necessarily want or need (finished basement, hardwood floors, kitchen island, etc.)
- New construction tends to include the most energy-efficient systems, saving you money on utilities. In fact, homes built after the year 2000 consume an average of 21% less energy to heat than older homes. Plus, their systems are usually covered by a warranty in case anything malfunctions.
- In new construction, major systems (heating, air-conditioning etc.) and roofs may not need to be replaced for a decade or two. Not so with older homes; with an average age of 36 years, these older homes contain furnaces, hot water heaters, windows and appliances that may be worn, defective or simply outdated. Replacements can run several thousand dollars apiece.
- Mature landscaping gives homes curb appeal (and big, shady trees can diminish the costs of air-conditioning) but it comes at a price. New construction often is delivered devoid of established plantings. Adding trees, bushes and flowers can run thousands of dollars and may still take years to achieve the look you desire.
- Consider appreciation. With pre-existing homes, the neighborhoods usually have a history and reputation, so you can predict growth in home value. With new, possibly gentrified neighborhoods, appreciation has yet to be proven.
There’s more to consider! Contact Ark Mortgage for complete information.