Custom Home Builds vs. Buying: Cost Comparison and Insights
With mortgage rates hitting record highs, many homeowners are considering alternative options to traditional home buying, like building a custom home. But is this route actually more cost-effective? Let’s take a look at the financial aspects of custom home building with custom home builders in Naperville and surrounding areas.
Understanding the Costs of Custom Builds
Building a custom home involves numerous expenses that may not be immediately apparent. These costs can include:
● Land acquisition
● Architectural design
● Permits and approvals
● Construction materials and labor
● Utility connections
● Landscaping
● Interior finishes and appliances
The construction cost can vary depending on factors like location, size and design complexity. On average, building a custom home in the 3,500-square-foot home can range from $1,050,000.00 to $1,750,000.00 in our local market – Naperville, Hinsdale, Willowbrook, Burr Ridge, and Wheaton, Illinois.
Financing a Custom Home Build
Financing a custom build typically involves a construction loan, which differs from a traditional mortgage. These loans are short-term, high-interest options that cover construction costs. They usually require a comparable down payment, often 5% to 10% of the total construction cost.
During the construction phase, a construction loan typically only requires you to pay interest on the amount disbursed, which can be easier on your finances while building. This interest-only period usually lasts for the duration of construction, often 6-12 months. For larger more complex homes the construction timeline can be longer. Be sure to discuss the timeline with your lender to be sure you stay in compliance with your loan terms. Once construction is complete, you have two main options with a construction loan: pay off the entire balance (which is uncommon for most borrowers) or convert it to a traditional mortgage. This conversion process, sometimes called “construction-to-permanent” financing, essentially replaces your construction loan with a standard mortgage, shifting you from interest-only payments to regular mortgage payments that include both principal and interest.
Comparing Costs of a Custom Build vs. Existing Home
While it’s tempting to think that building a custom home might be cheaper, it’s generally more expensive than buying an existing property. Consider these expenses:
● Higher upfront costs
● Potential for unexpected expenses during construction
● Extended timeline for completion
● Additional costs for landscaping and exterior features
● Higher property taxes due to newer construction
And though costs for a custom built home may seem extravagant to some, the benefits typically outweigh those expenses. Custom home builders are keen on design offering clients home features they may not typically see in prebuilt homes. These custom homes also often see more return on investment because of their build quality, higher end materials, and customized layouts/designs.
Is a Custom Build Right for You?
Custom homes are often best suited for those who are financially secure and value personalization over immediate cost savings. First-time buyers may find the process overwhelming and potentially more expensive than anticipated. However for those looking for their forever home with the customized features they desire, a custom home builder may be exactly what you’re looking for.
Consider things like your financial situation, timeline, and priorities when deciding between a custom build and an existing home. If customization is a top priority and you have the financial means, a custom build could be worth the investment.
Contact SG Home Builders to Speak About Your Plans with Custom Home Builders Naperville
If you’re considering a custom home build in the Naperville and surrounding area, SG Home Builders can help guide you through the process. Our experienced team of custom home builders will guide you through building your home with our design-build process. From the initial design to breaking ground, and even after completion, SG Homebuilders is the regions most dependable custom home builders. Contact us today to explore how we can turn your dream home into a reality.