Build a House Without a Mortgage

Tamsen Butler
Bricks

If your goal is to build a house without a mortgage, then you need to build up quite a bit of money beforehand. Trying to pay for house building expenses as they are needed can be an overwhelming task if you are unprepared financially.

How to Build a House Without a Mortgage

Building a house without approved financing can be a stumbling block if you are hiring someone else to do all the work. Most builders want proof that you have the ability to pay for the entire process before the builder will get started. The problem is that builders do not want to start a project that cannot be finished due to financial shortfalls. Remember that many builders use subcontractors for a good portion of the work overall, so the builder has to be able to hire these other workers with the confidence of knowing that everyone will be paid for their time and efforts.

If you do not have an approved mortgage but you want to hire a builder to build your home, you will probably have to prove your ability to pay for the entire process. A substantial down payment may be required before a builder will agree to start building. You will also have to buy the land beforehand if you don't already own it. It is up to you whether you purchase the land outright or buy the land with a loan, but attempting to build a home on land you do not own or are not actively purchasing will prove problematic. It is possible to buy land on its own and then hire builders later.

On Your Own

If you have the time and the talent, you can build your own home on land you own. While most people do obtain help for certain necessary tasks pertaining to the building of their house, there are some people who relish the challenge of building a home on their own from the foundation to the roof.

If you build a house without a mortgage on your own, you will still need to obtain proper permissions and permits from your county or city. Make sure you know what permits you need to obtain before, during, and after the build.

Know the Costs

Talk to a builder about the realistic costs associated with building the type of house you want. You may be surprised at how much the total process actually costs. While it is true that you will save a great deal of money by paying for your home in cash instead of paying over a series of years with interest charges, you need to have a good idea of the financial obligation you are creating for yourself by building a home.

Not only should you find out the potential costs for building a house, but you should also find out what your annual hazard insurance and real estate taxes will be. Just because you will not have a mortgage does not mean that you are exempt from these recurring financial obligations.

Other Financing Options

A mortgage loan is not the only option for financing the building of a home, but unless the money you borrow falls under the category of a mortgage debt, the interest you pay will probably not be tax deductible. Interest rates for mortgage loans are typically lower than other types of loans and financing the building of a home using credit cards and other revolving lines of credit can be a bad financial idea.

If you already own a home outright, consider obtaining a home equity loan to finance the building of your new home. This allows you to potentially enjoy a tax deduction without dealing with a first mortgage.

Build a House Without a Mortgage