Buying a home or building one are viable options for those looking to purchase a home before retiring. However, people’s circumstances may vary, and they’ll choose what is best for their current situation. Buying an existing property or building a customized one has its advantages and disadvantages that might help you decide which one will serve you best in the long run. Along with a few factors, it will also come down to your preference, timeframe, and more. Through the following comparisons, this article aims to assist you in deciding which option is best for you.
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Cost
According to the National Association of Home Builders (NAHB), the median cost to build a home as of May 2022 is USD$449,000. The price includes the plot of land where the house is situated. On the other hand, the national median cost of purchasing a home in regular neighborhoods or retirement villages is currently at USD$339,815.
Notably, building a home is more expensive than purchasing an existing home on a plot of land due to several considerations. This comprises construction plans, labor, the cost of materials, and the location of the residence. In addition, it would be beneficial to search for available areas, preferably near essential amenities such as schools, offices, hospitals, and groceries.
Those knowledgeable in construction projects can do some of the work themselves. Otherwise, it’s recommended to leave plumbing and wiring to professionals.
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Schedule
If you’re pressed for time and hoping to move in quickly to a new home, buying a home is the better option. Regardless of the status of the home market, there are options to choose from, and you can seek the assistance of a real estate professional. They will help you find a home in your preferred location. Once you find what you’re looking for, you can start the home-buying process, which can take up to 60 days.
On the contrary, building a house can take up to seven months. That is, if everything goes smoothly. It begins with designing a house plan. Then owners must obtain financing, hire contractors, and buy the materials. However, the time frame may be shorter if you’re constructing a fixer-upper.
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Customization
When building your dream retirement home, the home’s construction allows for more customization options. Being involved in the construction of your home gives you more control when choosing the design and layout of the house. It enables you to design a home that fits your lifestyle. You can choose the cabinets, flooring, sink, counters, and finishes you like. In addition, you can also choose innovative materials that support energy conservation, which can significantly reduce your electricity bill in the long run.
Conversely, if you decide to buy a new home, you may need to have repairs done sooner. You should note that the previous owners occupied it; thus, it may have accumulated wear and tear. You could renovate it, but it won’t give you complete satisfaction in choosing the features you want. Moreover, high demand and supply chain issues could also delay the renovation project.
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Financing
Purchasing a property entails obtaining a mortgage loan from a bank or a private lender. A buyer’s agreement with the lender gives the lender the right to seize possession of the property if the borrowers fail to repay the mortgage with interest. Typically, lenders use various factors to determine if a lender qualifies for the loan and how much they are willing to provide. It includes the financial information of the borrower and how much they can repay without putting a strain on their household budget.
On the other hand, when you build your home, construction loans will apply. These loans are payable for only a year or a few months. The loan is disbursed during home construction, and the interest is paid as the building progresses. Once construction is finished, the loan must be repaid. Construction loan rates are higher than regular mortgages, but you can refinance it into a standard mortgage if you want. If you can afford it, you can also take another loan to repay the existing construction loan.
In Conclusion
Buying a home or building one for retirement depends on your circumstances and how they will affect your life in the long run. It will also rely on the factors mentioned above, given that both require financial resources that you can obtain through various financing options. One factor is the location where you want to relocate for health reasons or to be closer to relatives. Whatever decision you make should be based on your ability to financially manage with the help of trusted family members or friends, financial experts, and real estate professionals.
