My husband and I are planning to build a new home next year, hopefully around September 2022. We don't have any debt. We have bought the land with money we had outright and will sell our mid-range home to fund the build probably around May 2022. Initial indications are that we will have enough money to build the house plus a little left over for contingencies. However, with costs that feel unpredictable (rent while we build, cost of building products, rising wages) we are wondering whether we should get a two year mortgage now while interest rates are low in case costs rise so that we can draw upon it if we get stuck. Having a mortgage of $200K would also allow us to stay in our home for longer and get the foundations in the ground before we had to sell our house, and spend less money on rent. Paying the cost of P&I on a mortgage is cheaper than the rent we would likely be paying at that building milestone. We don't want to have a mortgage at the end of the build as we are in our mid-50's but could service a small one if need be. Does this idea have merit?

apple27 - 2021-08-05 10:22:00

Well if you do your sums correctly then it's over to you. Nothing like staying in what you know, if things turn to shit then less stress, that's the biggest worry for older people.

msigg - 2021-08-05 12:38:00

Would you have to draw down the mortgage to lock in the lower rate?
Line of credit might work better - but higher floating rate.

pcle - 2021-08-05 13:02:00

Thanks pcle - will investigate that option.

apple27 - 2021-08-05 13:10:00

I would be borrowing, building a shed for garaging later and using for storage and possibly living in while house build which gives selling a less urgent need. Maybe it would mean you wouldn't have to rush the sale and you could get more for it. Save the rental money. I had friends that bought a caravan and lived in it for 2 years while they built. Did a lot of the work themselves. Meant no rush to build and when finished they sold the caravan (for more than they paid). So that may also be an option.

bryalea - 2021-08-05 13:24:00

Thanks bryalea but we have a convenant saying that you can't live on a caravan while building.

apple27 - 2021-08-05 13:49:00

There is a special construction mortgage rate at the moment from some providers of 1.79% for this sort of scenario - thats so low its probably well worth having and they will let you leverage equity in an existing house to get money to get the building going.

The Construction Floating Rate is a special discounted rate of 1.79%, and the discount is available for three years from the initial advance.

mikek - 2021-08-05 14:40:00

Thanks mikek, I will have a look for that.

apple27 - 2021-08-05 15:08:00

mikek wrote:

There is a special construction mortgage rate at the moment from some providers of 1.79% for this sort of scenario - thats so low its probably well worth having and they will let you leverage equity in an existing house to get money to get the building going.

The Construction Floating Rate is a special discounted rate of 1.79%, and the discount is available for three years from the initial advance.

Wow,
That’s a great incentive to develop, perhaps start your project sooner and stay living in your house until the build is completed apple27?

Less stress, you’d save a small fortune on rent, and time frame not as important in case of hold ups.

Enjoy your new home, a very exciting time for you ????

lovelurking - 2021-08-05 15:12:00

apple27 wrote:

Thanks bryalea but we have a convenant saying that you can't live on a caravan while building.

Put the caravan in the large shed and live in it

toyboy3 - 2021-08-05 15:36:00

toyboy3 wrote:

Put the caravan in the large shed and live in it

yes

spead - 2021-08-05 20:53:00

[quote=lovelurking

Wow,
That’s a great incentive to develop, perhaps start your project sooner and stay living in your house until the build is completed apple27?

Less stress, you’d save a small fortune on rent, and time frame not as important in case of hold ups.

Enjoy your new home, a very exciting time for you ????[/quote]

Thanks for those kind words! I am excited too, although it's a big undertaking.

apple27 - 2021-08-06 09:18:00

Ask a bank to promise an interest rate some time in the future. Good luck.

amasser - 2021-08-06 10:43:00