Posted at 5:00 am
France Gagnon liked to go on foot to have a drink on a terrace, dine in a restaurant or go see a show at a festival. “But, with the pandemic, we couldn’t do that anymore, and there were only the inconveniences of living in the city, like being stuck in traffic congestion to go for a motorcycle ride or go skiing,” she says in her condo. in Montréal.
So she and her husband bought land in the Estrie countryside to build a house for their upcoming retirement.
“We planned on a budget, then when we made the plans we realized we wanted something big enough to be able to keep our kids sleeping when they came to visit,” she explains.
They planned to start by building just a garage with a loft above, then quietly add the other parts of the house on their own. “But the City Council does not allow it, so building everything at once will cost more,” says Francia.
They will opt for a prefab structure and then do the interior themselves and hire professionals, especially for the plumbing and electrical.
We estimate that the total project will still cost us almost $250,000 more than we originally wanted.
“But at least they highly recommended the contractor we chose for the shell, so that puts us at ease,” says France.
France is also considering delaying his retirement a bit, as his employer made him an attractive part-time job offer until 2025.
Although the land has not yet been cleared and does not have the infrastructure of services, the members of the couple are well aware that there are many stages to go through and many possible unforeseen events before they can relax by the fireplace. For this reason, they also look for country houses for sale in the area and, if they find one, they resell it.
Elements that complicate the financing of the project
France and her spouse are not the only ones in this situation. “During the pandemic there was really a sense of urgency to get out of the city that is less there now, the market has retracted a little bit, so we are no longer in the same madness of overcoming and multiple offers,” says Marie-Piers Barsalou, certified. real estate broker at Sotheby’s International Realty Quebec, in Eastern Townships.
However, he points out that prices have increased by 35% in the region during the pandemic. He now hopes that people who made a quick acquisition before making a good estimate of construction costs will put their land up for sale.
Hadi Ajab, an independent financial planner and mutual fund representative for PEAK Investment Services, already sees people in his clientele reevaluating their construction project. “Their reasons depend on how they will have to finance their project,” he says.
It indicates that those who finance it with their savings have generally seen the value of their investments fall. And those who want to get a mortgage have seen interest rates rise. Finally, those who want to sell their current property to build the new one must also live with the prices that are beginning to fall in the market.
“All this while the price of construction projects has increased in recent years,” says Hadi Ajab. Whatever the mode of financing, it is necessary to carry out a financial plan to ensure that it remains feasible and desirable. »
The fairest possible assessment of costs
Although there will always be an element of the unexpected, a detailed cost assessment is essential, according to Hadi Ahab. He points out that there are great stages to consider in the construction. First, plans, specifications, permits, deforestation, excavation and foundations. “Having foundation walls and a concrete floor represents about 30% of the total project costs,” he says.
It then specifies that the portion of plumbing, electrical, walls, roofs, windows, roofing and exterior finishes represents approximately 40% of the costs. And there is another 30% for exterior stairs, sanitary equipment, counters, cabinets, etc.
“You have to plan the cost of each item and sub-item as carefully as possible, taking into account materials and labor, you have to get two or three firm quotes that include delivery dates, payment terms, and you have contracts for written to leave the minimum space for interpretation. »
He also advises doing some research to make sure your chosen contractors are well-registered and have the necessary permits to fall back on in the event of a problem.
Finally, he insists that the budget must be respected. “If we’ve budgeted $400,000 and are ultimately moving toward a project that’s going to cost $500,000, we have to go back to the drawing board and reevaluate certain options,” he says. Money does not grow on trees. The construction of your country house should not become a nightmare. It must be a dream come true. »
Evolution of the prices of materials
Contrary to what many people may think, the prices of many materials in major stores have fallen recently, notes Richard Darveau, president of the Quebec Association of Hardware and Building Materials (AQMAT). “And this, while the consumer price index [IPC]then inflation has increased a lot,” he says.
He gives the example of 2 x 4. “At some point during the pandemic, it hit $12 or $13,” he says. At the end of July, it was at $5. Prices have come down a lot, but I don’t think we’ll go back to prices like we had before the pandemic, around $2 or $3. »
Four financial elements to consider
Beyond the cost of building a villa, there are several elements to consider in order to carry out your project.
Do you meet the ratios to qualify for a loan?
Financial institutions use two formulas to estimate how much a household can borrow. First, there is the gross debt amortization ratio. “It is strongly recommended to stick to a maximum of 32% of your gross income dedicated to expenses related to the purchase of real estate, therefore, mortgage payments, municipal and school taxes, heating and electricity, to be able to pay for other expenses, ” says Hadi Ajab, independent financial planner and mutual fund representative for PEAK Investment Services. Then there’s the total debt amortization ratio that adds up other debts like car loan, credit card balance, etc. “It is strongly recommended to stick to a maximum of 40%, although institutions can go further,” he says.
Do you know how financing for self-construction works?
“It is far from being the same as a traditional mortgage loan that has the property as collateral”, specifies the financial planner. As the property does not yet exist, the financial institution does not deliver all the money at once. “It will go in stages, asking for details of the work carried out, sending inspectors and recording each disbursement,” he adds, specifying that not all financial entities grant this type of credit.
Have you accumulated 10% more?
“You should always have cash at least 10% more than the cost of the project, including the price of the land, in addition to the down payment,” says Hadi Ajab. This will be used to purchase materials initially, pay deposits, etc. Most financial institutions require it and real life requires it too. »
Have you evaluated what this project will take away from you?
Building a house in the country is a great life project. And it is expensive. “Choosing to take out your savings to carry out this project is a big decision,” says Hadi Ajab. You have to see what this choice will force you to give up. Will you be able to keep traveling, to afford good restaurants? You have to be sure that this is really what you want. Because necessarily, this choice means that you will give up certain things. »
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