Funding the dream home project

The most perfect building lot has been found, and the nicest of prefabricated houses (in Finnish, talopaketit) selected. The next issue is to think how the whole house building project is funded.

Use an expert

Even in the single-family house construction project, cost estimates should be based the expert analysis. Non-professionals tend to forget some integral parts of the project, and overestimate the amount of their own work. The expert can prepare a reliable cost estimate and thus give a realistic view of the needed funding.

Dismiss the amount of your own work

Your own work is often see as a way to reduce the cost. More advisable should be to think that as a financial leeway. When the builder has the ability to finance the construction process without any need for doing work by oneself, there will be no shortage, even though the amount of own work is not fulfilled for example due to an illness, accident or changes in everyday work conditions.

Good bad bank loan

Most of the builders of their own house do not have finance for the house ready, but decide to get the bank loan instead. The bank obliges security collateral for almost all loans they will give; when building the house, collateral is usually the house to be built. If necessary, additional collateral like bondsman or government guarantees can be used. Other valuable assets can be used as well.

Currently, the vast majority of house builder select Euribor as the loan reference interest rate.

Another common option is a bank-specific prime interest rate. Currently, interest rates are historically low and it is evident, that at some point they begin to rise. The house builder should be prepared of this, or use interest rate ceiling. The interest rate ceiling assures that the interest rate does not increase above the agreed level.

Insurances in condition

Building a home is a major financial risks. One should consider all insurances for the project, starting from the ones for the bank loan. The other insurances worth considering are the insurance for illness and unemployment, accidental permanent disability and even for death, as unpleasant as the idea of that might feel. Every home builder should also take care of building insurance and statutory insurances, and if there is work to be done by oneself, personal accident insurance and developer should take care of their own accident insurance and the insurances of other voluntary workers.

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