How much does it cost to build a house?

The cost of building a house often surprises new home builders, and this has never been the case more than in the spring of 2021. As CBC news recently reported, rising lumber costs over the past year means some of your building supplies could cost as much as three times more than they would have before the pandemic hit.

At the same time, the cost to build a house varies greatly depending on several factors, including the square footage as well as where in Canada you plan to build. In addition, there are several other costs to consider.

Assuming you’ve already purchased land, here’s a breakdown of costs:

As of September, 2020, Re/Max reports that the average construction cost for building a house ranges from $118 to $189 per square foot, however, this could now be substantially higher based on the cost of materials. Make sure to get current quotes from your contractor, then add another estimated 15% for overages and unexpected expenses.

Each municipality has different costs and requirements when it comes to getting building and electrical permits and paying fees. These may vary greatly from just a few hundred to a few thousand dollars.

Note: Some remote rural areas operating as “unorganized townships” may have lower fees and more lenient building application processes.

Land surveys should cost between $600 and $1,500.

This varies depending on lot, location, and grade. Estimated costs range from $3 to $10 per square foot.

Digging out the basement and pouring concrete/building the foundation depends once again on building size and location, but could easily cost anywhere between $50,000 and $85,000.

Electricity costs for new builds vary widely across Canada, but generally depends on the distance between the new build and the closest connection. Expect a connection charge of several thousand dollars plus additional costs to run the hydro lines to your home resulting in substantial costs. Alternatively, it might be worth installing solar panels to power your home.

For heating - in most areas, your options could include one or more of propane/natural gas/oil, or even wood. Installation costs vary depending on size of fuel tank, furnace, or boiler, plus the type of fuel available. Expect to pay at least $5,000 or more plus arrange for regular fuel delivery, or at least $2,000 for a wood stove plus additional labour, parts (include stove pipe and chimney), and installation charges from an accredited installer.

This could be in range of $20,000 or more depending on location and depth required to drill.

Septic field or septic tank installation ranges from about $7,000 to $25,000.

When you create your budget for how to build a house, you could also face these additional fees:

• Legal fees for mortgage/land purchase price (range from $1,200 to $1,600)
• Professionally administered soil and water quality tests (range from $800 to $2,000)
• Land transfer tax<
• GST/HST on all services and materials

When choosing a building site on your property, in addition to a nice view, consider these points that could potentially help lower some of the building costs:

• Distance to water
• Grade of lot for preparation
• Space for a septic tank/system
• Road access for equipment plus utility access and connection
• Tree and large rock location for excavation and grading

We’ve all heard the nightmare stories of fly-by-night contractors disappearing with hefty deposits. When researching how to build a house in your area, look for recommendations and referrals from locals.

Search for at least three accredited contractors near you on the Better Business Bureau, and look for contractors that participate as expert sources for local media such as radio, television, and newspaper articles. Try to get quotes from all three. And don’t forget to brush up on what to ask a contractor before arranging a meeting.

One thing is certain when it comes to building a custom house - you must be willing to accept a flexible timeline. Generally, it can take 10-16 months to build a new house, but your timeline depends on everything from weather conditions to contractor/subcontractor schedules, permit/approval times, and building material supply chains.

Financing a home build works a little differently from financing the purchase of an existing house and property. You have several options.

Firstly, while you can indeed finance your home build with a construction mortgage, you might require a larger down payment of 25% to 30% depending on your lender. You’ll also likely need to own the land outright before getting a loan to build your home.

It’s important to understand that construction mortgages come with additional fees, and the money is often released gradually as you meet and pass inspection for certain building stages.

Another option is to finance your build through a combination of credit cards, unsecured and/or home equity credit lines. While paying for building supplies is easy with a credit card, carrying that balance could become expensive.

And a third option is to build your own custom house with financing through a readvanceable mortgage, such as the Manulife One mortgage. However, to qualify for Manulife One, you must own the land you’re building on.

Putting a Manulife One mortgage on your existing property is a great way to leverage your existing equity to buy land and build on it before you sell your current house. This scenario could also give you the option to keep both houses, and you could make either of the homes as a rental or recreational property.

Additionally, your home building budget should include funds for providing contractor deposits of anywhere from 15% to 30% prior to work even beginning on your home.

Carrying out careful research on all home building costs in your area including labor, contractor rates, building supplies, equipment, utility connections, and fees and permits before committing to building a home makes good financial sense. Talk to a local advisor today about whether Manulife One could be the right financing option to help make your homebuilding dreams a reality.