Why adding in a lot of extra's to the house you want to build is not advisable

So the bank told you you can borrow $450000 and you’ve got exactly the 10% deposit ($50000) you need for the Package you want to put together for $500000. Found a block, found the house and your consultant has told you it comes to $460000 only. Brilliant! Now you think you can go to town and add extra’s in.. While a few things might not be a problem, a lot could be.

Let’s say you add in $40000 worth of sunken floors, airconditioning, painting, dropped ceilings, down lights and expensive kitchen cabinetry. The builder is happy to build it for you and puts it all in the contract. The broker sends all your paperwork off to the bank and then the news comes in…

The bank values your $500000 package only at $470000… Why? Because the other homes in the area of a similar size are probably going for around that price. Because there is not much security in air-conditioning (worth nothing after a few years), down lights (you can take them out and sell them), kitchen cabinetry (you could take that out too). So now the bank is willing to give you only 90% of that $470000, which is $423000, so you need to put in $500k-423k= $77000 yourself. And you had only $50000.

Pa-powwwww… The deal falls over. You can’t finance it. So instead of trying to get everything instantly in your first home, do what your parents probably did; build the home and add to it over time.. If you have a lot of savings though, or you know the bank is willing to lend you more then 90% and you can finance it that way; go for your life; you’ve earned it!

#finance #housedesign #valuation