Posted at 5:00 a.m.
France Gagnon liked to go on foot to have a drink on a terrace, have dinner in a restaurant or go see a show at a festival. “But, with the pandemic, we couldn’t do that anymore, and there were only the inconveniences of living in the city, like being caught in traffic congestion to take a motorcycle ride, or go skiing,” she says. in his condo in Montreal.
She and her spouse therefore bought a piece of land in the Estrie countryside in order to build a house to spend their approaching retirement there.
“We planned for a certain budget, then when we made the plans, we realized that we wanted something big enough to be able to keep our children sleeping when they came to visit us” , she explains.
They planned to start by building only a garage with a loft above, and then add the other parts of the house quietly on their own. “But the City does not allow it, so building everything at once will cost more,” says France.
They will opt for a prefabricated house shell and then take care of doing the interior themselves and hiring professionals, especially for the plumbing and electricity.
We estimate that the total project will still cost us almost $250,000 more than we wanted at the start.
France Gagnon
“But at least the contractor we chose for the shell came highly recommended to us, so that reassures us,” says France.
France is also considering slightly delaying his retirement, his employer having made him an attractive offer of part-time work until 2025.
While the land has not yet been cleared and it does not have the service infrastructure, the members of the couple are however well aware that there are many stages to cross and many possible unforeseen events before can relax by the fireplace. They therefore also look at country houses for sale in the area and if they find one, they will resell their land.
Elements complicate the financing of the project
France and her spouse are not the only ones in this situation. “There really was during the pandemic a sense of urgency to leave the city which is less there now, the market has retracted slightly, so we are no longer in the same madness of one-upmanship and multiple offers says Marie-Piers Barsalou, certified real estate broker at Sotheby’s International Realty Quebec, in the Eastern Townships.
However, she points out that prices have increased by 35% in the region during the pandemic. She now expects people who made an acquisition quickly before making a good estimate of construction costs to put their land up for sale.
Hadi Ajab, an independent financial planner and mutual fund representative with PEAK Investment Services, is already seeing people in his clientele reassessing their construction project. “Their reasons depend on how they will have to finance their project,” he says.
He indicates that those who finance it with their savings have generally seen the value of their investments fall. And those who want to get a mortgage have seen interest rates go up. Finally, those who want to sell their current property to build the new one must also live with the prices that are starting to drop on the market.
“All this while the price of construction projects has increased in recent years,” says Hadi Ajab. Whatever the mode of financing, it is necessary to carry out a financial plan to ensure that it is still feasible and desirable. »
The fairest possible assessment of costs
Although there will always be an element of the unexpected, it is essential to carry out a detailed evaluation of the costs, according to Hadi Ajab. He specifies that there are major stages to consider in the construction. First, plans, specifications, permits, deforestation, excavation and foundations. “To have foundation walls and a concrete floor, it’s roughly 30% of the total project costs,” he says.
Then he specifies that the plumbing, electricity, walls, ceilings, windows, roofing and exterior finish portion represents approximately 40% of the costs. And there is another 30% for exterior stairs, sanitary equipment, counters, cabinets, etc.
“You have to plan the cost of each item and sub-item as carefully as possible, considering materials and labor, you need to get two or three firm quotes that include delivery dates, terms of payment, and you need to have written contracts that leave the least room for interpretation. »
He also advises doing a little research to ensure that the contractors chosen are well registered and have the necessary permits in order to have recourse in the event of a problem.
Finally, he insists on the fact that you have to respect your budget. “If we have budgeted $400,000 and, in the end, we are moving towards a project that will cost $500,000, we have to go back to the drawing board and reassess certain choices,” he says. Money doesn’t grow on trees. The construction of your country house must not become a nightmare. It must be a dream come true. »
Evolution of material prices
Contrary to what many people may think, the prices of many materials in major stores have fallen recently, notes Richard Darveau, president of the Quebec Association of Hardware and Building Materials (AQMAT). “And this, while the consumer price index [IPC]so inflation, has greatly increased,” he says.
He gives the example of the 2 x 4. “At some point during the pandemic, it hit $12 or $13,” he says. At the end of July, it was at $5. The prices have come down a lot, but I don’t think we’ll go back to prices like what we had before the pandemic, around $2 or $3. »
INFOGRAPHIC THE PRESS
Four financial elements to consider
Beyond the cost of building a chalet, there are several elements to consider in order to carry out your project.
Do you meet the ratios to qualify for a loan?
Financial institutions use two formulas to estimate how much the household can borrow. First, there is the gross debt amortization ratio. “It is strongly recommended to stick to a maximum of 32% of your gross income devoted to expenses related to the purchase of real estate, therefore mortgage payments, municipal and school taxes, heating and electricity, to be able to pay for other expenses,” says Hadi Ajab, Independent Financial Planner and Mutual Funds Representative with PEAK Investment Services. Then there is the total debt amortization ratio which adds up other debts, such as the car loan, the balance on the credit cards, etc. “It is strongly recommended to stick to a maximum of 40%, although institutions can go beyond that,” he says.
Do you know how financing for self-build works?
“It’s far from being the same thing as a traditional mortgage loan which has the property as collateral”, specifies the financial planner. As the property does not exist yet, the financial institution does not give all the money at once. “It will go in stages, asking for details of the work carried out, sending inspectors and notarizing each disbursement,” he adds, specifying that not all financial institutions grant this kind of loan. .
Have you accumulated 10% more?
“You must always have cash at least 10% more than the cost of the project, including the price of the land, in addition to the down payment,” says Hadi Ajab. This will be used to purchase materials initially, pay deposits, etc. Most financial institutions require it and real life requires it too. »
Have you assessed what this project will take away from you?
Building a house in the countryside is a major life project. And it is expensive. “Choosing to take out your savings to carry out this project is a big decision,” says Hadi Ajab. You have to look at what this choice will force you to leave out. Will you be able to continue to travel, to afford good restaurants? You have to be sure that’s really what you want. Because necessarily, this choice means that you will give up certain things. »