Building a House Versus Buying a New House

By Emily Southey | 11 minute read

Debating whether to buy an existing house or build a new one from scratch? You’ve come to the right place. Buying any sort of property, whether it’s vacant land you plan to build a home on or a traditional resale home, is a major decision. Therefore, you should take the time you need to carefully consider whether buying or building your own house is right for you. To help you make this important decision, we’ve compiled a list of the pros and cons for each.

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Building a New House Overview

Whether you’re a first-time homebuyer or a current homeowner, building a new house from the ground up can be an exciting prospect. However, building a new house instead of buying a resale property comes with both advantages and disadvantages, which we lay out below.

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The pros of building a new house

From greater customization to lower energy costs, some of the pros of building a new house are as follows:

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Opportunities for customization

Building a house from scratch allows you to customize and personalize it however you want. From the floor plan and the kitchen cabinets to the lighting, sinks, and even the doorknobs, you get a say in every single aspect of your home. If you have strong preferences when it comes to architecture and interior design, or a specific vision for your home that you haven’t found anywhere else on the market, the opportunity for complete customization that comes with building a new home might be extremely appealing. Plus, when you build a home that suits your taste and lifestyle, you might be more likely to stay in it for the long term.

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Less competition

When a housing market is hot, buying a home can be stressful. Greater competition leads to bidding wars, which leads to homes selling over asking, costing the homebuyer more money. But by purchasing land instead of a resale property, you effectively remove yourself from this competitive landscape. In fact, you may have no competition whatsoever, depending on the land you want to purchase. This is a major plus for buyers who want to avoid the stress of the housing market.

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Minimal maintenance in the short term

Since your home will be brand new, you won’t have to worry about maintenance or repairs, at least in the first few years. In contrast, when you buy a resale home, there’s always a chance that you’ll discover a major problem after the fact (one of the reasons home inspections are so important). But when you build a home from the ground up, you won’t have to worry about asbestos in the walls or a leaky roof. Instead, you’ll have peace of mind knowing that your home meets all current building codes and features new, state-of-the-art technology, resulting in minimal maintenance.

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Greater energy efficiency

Another advantage of building a new house is that newer homes tend to be built with greater energy efficiency. So if you’re looking to reduce your carbon footprint, constructing a brand new house might be the perfect way to do so. Since you get to choose the design of your new home, you can prioritize green architecture and sustainability, incorporating energy-efficient HVAC units, smart technology, and sustainable materials into the design. Plus, the more energy-efficient your home, the lower your utility bills.

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You are the first person to live in the home

One final pro of building a new house instead of buying an existing one is that you will be the first person to live in it. This means a literal fresh start, not to mention that you get to enjoy brand-new everything, from the HVAC system to the plumbing to the lighting.

The cons of building a new house

Despite the many advantages of building a new house, doing so also comes with disadvantages, such as those listed below.

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The cost

One of the main disadvantages of building a new house (one that deters many homeowners from doing so) is that it is expensive. In fact, in most cases, it costs more than buying an existing home. Beyond the main costs of building materials for walls, windows, floors, and roofing, there are often hidden costs that come with building a home from the ground up. For example, finishes like countertops, appliances, and fixtures can be pricey, as can upgrades or unforeseen costs. Plus, homebuyers must remember that there are also post-move costs to consider, like landscaping.

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The time

As you might suspect, building a new house takes considerably longer than buying an existing home. It takes an average of seven months to construct a new house. However, this time frame has been significantly longer due to supply chain issues exacerbated by the COVID-19 pandemic. In contrast, closing on a house can take as little as 30 days. Homebuyers must keep this in mind before committing to building a house, especially since they will need to pay to live elsewhere until the project is completed.

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The price is the price

Typically, there is very little leeway with the price when purchasing land. So unlike how you would enter a homebuying transaction expecting to negotiate, the price is often firm when buying land to build a new house. Not being able to negotiate might be a turnoff to buyers, especially if you’re looking to get the most bang for your buck.

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High stress

Building a home from scratch can be incredibly stressful. After all, it’s a long and complex process that requires you to not only purchase the land but settle on a home design, pick out finishes and materials, approve all specifications, and review wordy contracts. It’s a much more hands-on process than if you were buying a resale home. Plus, construction on new homes is often delayed, and staying on budget can be tricky, especially the longer the project goes on. Homebuyers must possess the stamina and perseverance building a new home requires, as without it the process can be very stressful.

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Expensive financing

Securing financing is a key part of both buying a new house and building one. Unless you have the capital to pay for the home yourself, you will need to secure a loan. However, land loans can be harder to obtain and often come with larger down payment requirements and higher interest rates. Beyond the loan needed to purchase the land, you may also need to obtain a construction loan to help you finance the actual building process. Once the project is complete, homeowners will then need to take out a traditional mortgage. All in all, the financing of a new home can be expensive, adding to the overall costs.

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The cost of building a new home

Speaking of costs, you now know that building a new home tends to be more expensive than buying an existing home. But what exactly are you paying for? We break down the main costs associated with building a new house below.

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• Building materials for the exterior of the house: This includes basic materials, such as lumber, that are used for the walls, doors, roofing, and windows. Building materials may account for up to a third of the home’s total cost.
• Interior finishes: Finishes for the home’s interior typically eat up another third of the home’s total cost, and account for items like kitchen cabinets, flooring, and countertops. Fun fact: Kitchens and bathrooms are usually the most expensive rooms to build.
• New appliances: Unlike resale homes that might come with certain appliances, you will need to buy brand new appliances for your home. Appliances may include a washer, dryer, oven, refrigerator, dishwasher, and more.
• Mechanical costs (plumbing and HVAC): Of course, your new home will have modern plumbing and HVAC systems. Buying these units, developing these systems, and having them installed are other costs you will need to budget for.
• Architect and engineer drawings: Unless you are an architect, you will need to hire one to help you design your new home.
• Multiple loans: As mentioned above, securing financing for your new home can be costly. Many homeowners need to take out two separate loans to fund their home, one for the construction and one for purchasing the land (otherwise known as a construction loan and a land loan, respectively).
• Building permits: Before construction on your new home begins, you will need to obtain the necessary building permits (applying for and obtaining these permits will eat into your budget).
• Utility hookups: Adding connections for basic utilities, such as gas or hydro, will also cost money.

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Guide to building your own house

To help you decide whether building your own house is right for you, we’ve put together a guide to doing just that. From setting your budget to purchasing the land, check out this step-by-step guide to building a new home in Ontario.

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Set your budget

The first step to building your own house is establishing a budget. If you don’t already own the land you hope to build on, then the land purchase will be a key part of your budget. When settling on a realistic budget, be sure to consider all costs associated with building a new home, from the building materials and appliances to the cost of utility hookups, building permits, loans, and hiring an architect.

Purchase land

Once you’ve determined your budget, it’s time to start searching for available land to buy. One of the easiest ways to search for land is online. There are several types of land available and knowing the difference between each is crucial.

• Raw land: Raw land is land that has never been developed and has no existing structures or utilities like electricity, water, or a sewer system. In some cases, it may not even have road access. Raw land is the most basic type of land you can buy.
• Vacant land: Vacant land is a step up from raw land as it is serviced or partially serviced. This means that it likely has some or all existing utilities like electricity, water, and septic, and could have pre-existing developments. However, like raw land, it won’t have any permanent structures. As an example, an open field would likely be considered vacant land in Ontario, whereas farmland would not.
• Zoned land: Zoned land is land that is designated for a specific type of usage. Types of usage in Ontario range from commercial and industrial to recreational, agricultural, or residential. Before buying land in Ontario, be sure to research local zoning laws to make sure you don’t purchase land that isn’t zoned for residential.
• Crown land: One final type of land that may be available to homebuyers is Crown land. Crown land is public land owned by the provincial government of Ontario. Most Crown land is located in the northern part of Ontario, and even though it is publicly owned, it can still be purchased or rented, but only in specific circumstances. There are more restrictions on Crown land than any other type of land on this list. Also, this type of land is typically sold at market value.

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Design your home

After purchasing land, the fun part begins — designing your dream home! For this step of the process, you will need to hire an architect, engineer, or draftsman who can turn your dream into a reality. However, before meeting with an architect, it’s a good idea to consider the basics, such as your preferred number of bedrooms and bathrooms, design style, the amount of entertaining space you want, and what your top priorities are. While an architect likely won’t be able to give you an accurate cost estimate for their design, a builder certainly will, which leads us to the next step.

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Find a builder

Choosing a builder is one of the most important steps in the home-building process. Research reputable builders in your area and interview potential candidates. Once you’ve hired a builder, they will review the design and give you an accurate cost estimate. They can also help you understand the cost of various design elements.

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Choose your finishes

Picking the finishes (doorknobs, cabinets, countertops, faucets, appliances, paint, flooring, and more) will be a constant item on your to-do list throughout the building process. Your builder should provide a timeline on when each item needs to be chosen according to their construction schedule.

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Move in

The final step in the home-building process? Moving in! That’s right, after months (or even years) of patiently waiting for your dream home to be complete, it’s finally time to take up residence. As you spend your first few days or weekends in the home, you may notice small things that need tweaking. Be sure to stay in communication with your builder so they can handle anything that needs taking care of.