The first step to home ownership

OWNING A HOME is not only a dream for most people but for many, it is one of the largest and most important investments of their lives. Some people spend years saving and preparing to become a homeowner and even more years paying off mortgages and loans.

This is why one of the first questions any aspiring homeowner should ask themselves is, should I build my home, or buy it?

Business Day asked the same question of financial institutions and homeowners and the answer was the same.

The choice is yours.

However, there are still some important things one has to consider when choosing whether to build or buy a house. While it may seem cheaper on paper to build a home, you can run into serious hiccups that could deplete your funds and leave you with an incomplete home and a massive bill on your hands. And, even though buying a finished home might seem hassle free, it costs a pretty penny. Not only that, but you may end up buying a home with unsatisfactory conditions, which will cost you even more money.

The first question one should ask is how much it costs to own a home. The median cost of a house in TT, according to Global Property Guide, is about $1.3 million. A one bedroom house could cost someone anywhere between $900,000 and $1.5 million.

One 58-year-old homeowner said when he bought his house in St James 30 years ago, the cost of properties were high, but not as high as they are today.

He bought his home for $249,000.

“It was very easy,” he said.

He told Business Day at the time a financial institution was investing an a townhouse development and he approached them for a house.

“Once we qualified, everything was done through the financial institution. It was even cheaper than normal because they had everything in place. Most people qualified, paid the downpayment and they handled the rest. Everything was in place.

“A house is not only a place to live but an investment, and with most investments there is a luck and chance element. You might buy and most times properties appreciate and some depreciate but at the end of the day most people would say it is better to buy a property than rent a home.”

The homeowner said he paid $1,800 a month until his mortgage was fully paid out.

Building a home seems cheaper on paper, but, according to several financiers things may be a little more complicated.

Building a house – a basic three-bedroom flat on 167 square metres or about 1,800 square feet – could cost about $530,285. But, besides building the house with a proper sewerage system, one also has to add acquiring land. The price of land varies by location – in rural central Trinidad, a lot of land can cost $100,000, whereas in prime Port of Spain residential areas, it can be as high as $6 million.

Then one has to think about purchase related costs which include legal fees, valuation reports, insurance fees and handling fees which would cost you somewhere between 15 and 20 per cent of the cost of the house. At minimum that could cost you around $79,000.

Then there are architectural costs which on average would cost about $12,000.

So let’s do the math:

Building actual home – $530,285

Purchase related costs – $79,000

Architectural costs – $12,000

In total, it will come up to about $621,285. And that's not even factoring the cost of land.

One woman said her mother had been sending money from her job in America to build their home in Sangre Grande for the past 27 years. She said her mother sent over $1 million since she started.

“Mom worked as a domestic worker in the US and sent the money. My dad would deal with the contractors. The land was my dad’s, the house was my mom’s.”

The woman said she was three-years-old when her mother left for America. Today, they still have not completed the three-bedroom two storey house but it is still “very comfortable.”

“It started off as a two-bedroom board house. We started with a little concrete room in the back and continued from there.”

She said she considers the home to be something for generations of their family to call home. She said she plans on adding to the house herself and investing in making the house even bigger.

“I would like to take up the mantle to do what I can. I can’t put the strain on my mother alone.”

People should also consider the level of difficulty acquiring a home when asking whether to build or buy.

When you buy a home, you buy it with all approvals set, and all issues supposedly dealt with. After dealing with insurance and legal fees, you could simply move in.

However, when you build a home things may be a little more complicated.

People may have to deal with contractors and other people who may be more interested in getting paid than doing the job to the owner's satisfaction.

“You will need what is called testicular fortitude,” said the homeowner from St James. “You can't just give the job to the contractor and say when the job is done call me. Things get stolen off property and things take longer than expected. ”

The woman from Sangre Grande expressed the same sentiment, saying in her case the people who needed to be watched were relatives who were handling the actual building of her house.

“They were taking the money and playing big shot with it,” she said. “We could have gotten even further with it."

TT Mortgage and Finance Co (TTMF) officials in an interview with Business Day said there is a higher level of risk when building a home. Business development officer Krystin Rose said loans for building homes are not usually paid out in bulk but paid out over a bridging period, and running out of funds when things cost more than expected could further delay the project. All the while you have to remember that you have taken a loan to build a house and would have to pay that loan back. The interest will also be higher until you bring a certificate of completion which proves the house is completed.

Rose advised future homeowners to do their due diligence whether buying or building a home. She said people should keep a close eye on their contractors when building to ensure that the job is being done the way they want it. She added that future homeowners should make sure to have Town and Country Planning Division approval as well so they would not run into problems.

When buying a home, Rose advised that people ensure they have proper legal representation to make sure there are no issues with the property. The homeowner in St James added people should make a proper check of the home they are buying.

“You can also buy a dream home and you find the building is still sub par. And now you have to put out some more money.”

So, build it or buy it, it is up to you. But you should remember that whether you buy or build your home there is still a huge element of risk involved.

Acquiring a home is the biggest decision of your life, so make sure and make the right one.