There are many benefits to building a new cabin over buying an existing one. For one, the overall cost is likely to be lower. Additionally, you can choose custom options that suit your needs and all the materials and appliances installed will be brand new. If building a cabin of your own is something that’s on your priority list for 2021, you’ll need to start at the beginning—figuring out your finances. Here are three factors to consider what will affect your financing for your dream cabin.
The first factor in your budget you need to consider is how much you can afford to pay on a loan each month. If you are unsure where your money is going, you should map out your current finances first. Find out what percentage of your monthly take-home goes towards your debts, your utilities, food, gas, and entertainment. Once you know how much your current housing costs, you can get a clear idea of how much you can spend on your cabin, whether you plan on moving into it full-time or keeping it as a second residence.
Most sources will recommend that you don’t exceed 28% of your income on housing. If you have other debts to consider, such a mortgage on a second home, student loans, credit cards, cars, or medical bills, be sure to factor these in when choosing how close to that 28% guideline you are willing to get.
Building a new home or cabin is different from buying an existing one when it comes to financing. Building a new house can actually save you money depending on the housing market, but it can also come with unexpected expenses. Additionally, it will take some time to complete, so there will be an overlap where you are still paying your current mortgage while also paying for the construction of your new cabin.
Traditional routes for financing include builder financing, new construction financing via traditional lenders, and bridge loans. For situations where these don’t cover your cost or you don’t qualify, you can look for a real estate private loan program. Private loans don’t have the same restrictions as traditional real estate loans, so they offer solutions to situations that would otherwise not be viable. This is a common option for people with damaged credit scores.
Potentially, the biggest factor in the overall cost is going to be the location of your cabin. You will pay a premium on convenient locations and areas with a higher cost of living. Additionally, if you don’t already own the land, you will need to add it into your allotted budget. The next thing to consider is the square footage of your home. Look real estate listings of finished cabins for square footage comparisons to get an idea of the size you want if you are unsure.
Aside from your builders, you can hire an architect for a custom-designed home, and a real estate agent to help you navigate the market and sell your current home. The costs involved in the actual construction include the foundation, framing, interior, and exterior finished, appliance, and installation of utilities.
Building a new cabin can be a bit more complicated than buying an existing one, but by taking the time to plan out your finances, you will have a lot more control over the process. Understanding the costs involved and your financing options can help you translate your dream cabin into a reality.