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House Construction Basics: Raising Finances

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Building your dream house by yourself is a major responsibility – but having sufficient money at hand can ease the stress considerably. 

If given a choice, you would like to live outside the city, in green environs and in a house that you built on your own – but you are daunted by the prospect of raising the money for such a project. Admittedly, building your own house is an expensive undertaking. But if you plan your finances properly, it should not be such a big challenge after all!

We list the steps you can take in raising adequate finances for your home construction:

* Assess your finances. The first step is to examine your bank account and money you can raise from your investments/other sources of income. This sum of money can pay the 20% to 25% of the money you need to pay before availing of a home construction loan. If you think you can borrow interest-free loans from your friends and family, you should do so to reduce the burden of an institutionalised loan.

* Find out current construction costs. Construction and labour costs go up every year, especially in the face of rising inflation. This year, the introduction of GST on various heads of materials and services in the construction industry, has further fuelled a price rise in the sector. Get an estimate of the project from an architect and contractor, mentioning the estimated prices of each item, from tiles to plastering, and from digging to roof laying. Get at least three different estimates for the sake of comparison.

* Research the best housing finance agencies. Now that you have a project estimate at hand, it is time to look for the best banks or housing finance agencies. Though you may be tempted to focus only on the current interest rates on construction loans, it is important to find the best fit out of several factors. Apart from offering lower current interest rates on construction loans, the lender must have a hassle-free application process, clear guidelines on loan disbursal, thorough yet quick evaluation processes, etc.

* Get a pre-approved house construction loan. Once you have decided to partner with a certain lending agency for your home construction loan, it is time to calculate how much EMI you may have to pay every month. Use an online tool to calculate the home loan EMI – knowing the projected EMI amount can help you streamline your finances even further.

* Mortgage another owned property to raise more money. Yet another way to raise more money for the expensive home construction job, is to mortgage another owned property. You can get a loan against property on the house you currently live in, or a commercial property that you own.

It is simple enough to get the loan for home construction – but do have a repayment plan in place so that you can repay the loan earlier than expected. Repaying early ensures that the loan proposition becomes more affordable for you.

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