Friday, November 2, 2012

To Build Or To Buy?

Yes, people, writer’s block is still going strong. I need a lap-top!!!! It was just perfect sitting on our living room couch with the perfect backdrop of TV or music and writing, drifting off, thinking, and returning to the post. Now, it’s more like sitting at the desk, the hubbie’s creative chaos all around, the chair too low for me to type comfortably, it just doesn’t feel RIGHT..

Anyways, a little update is in order I think. Richard and I have decided – rather spontaneously – to build a house. We knew we wanted to buy a house within the next three to five years; I had made an appointment with my bank’s mortgage adviser to find out just how much house we might afford. The feedback was quite positive and at that time I accidentally stumbled across that offer that meet our dreams almost down to “i”.  At the initial appointment with the developer we found that this was not a building ready to buy but that we would have to build ourselves – ooops! But after some more research on local builders and our options we learned, that it would not be as bad as “building” sounds to me but even has a few advantages over buying a house outright:
+ Purchase costs: The property sales tax and notary tax are measured on the sales value of the property only; savings about 85% of the sales-related tax.
+ Custom building: we are still having quite some influence on the final floor plan and can include our own ideas. If we had bought a finished house, we might have had to spend quite a sum to adjust it to our ideas.
+ Mortgage advantage: in Germany, the government is giving out ridiculously cheap loans for building a new house and building a house that meets certain energy-efficiency standards.
+ Realtor fees: since we are buying the property directly from the developer and order the house from the building company we save the cost of a buyer’s and seller’s agent, which again could be up to 7% of the total house price.
However, we also had to take a couple of disadvantages of building into consideration:
- Time: If we had bought a home, we could have simply done the necessary renovations and moved in, which should have not taken longer than a month; building a home we hope to be able to move in August or September of next year.
- Cost: Buying a house I would expect to pay both rent and mortgage for one month. Building, the mortgage will start to accrue over a period of about 9 months, and since we will have to do the flooring and painting the walls by ourselves, we expect to pay the full amount of both mortgage and rent for 2 months. However, the savings on purchase-related cost will more than make up for the extra cost accruing in the building process. I calculated that we would have to pay both the full mortgage rate and rent for about 12 months to match the savings from sales and notary tax alone, realtors not taken into consideration.
Since we are under no pressure to move quickly and have the income to float the extra monthly cost for a while we decided that this way would be the right one for us. When we had an appointment with a builder we decided on a 3-story townhome. At the current stage, we are proud owners of a little slice of land and have just signed our first loan and the building contract for the house. I will keep you updated on news regarding the progress. Building will not start until March of next year at the earliest and believe it or not, I am already trying to decide on room themes for the girls. Yes, I am officially excited to be a home owner by this time next year!

No comments:

Post a Comment