When taking on a home loan and buying a new house, one of the major decisions you’ll need to make is whether you want to build a new home with a construction loan attached or purchase an established house.

While home builders will usually have to wait longer to move into their dream home, buying an established home can come with its own set of pros and cons.

Read on to find out which option will suit your budget, and the advantages and disadvantages of buying an existing home or committing to the building process.

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Cheaper to build or buy an existing house?

Building your own home has certain financial advantages, particularly for a first home buyer. You may be fortunate to qualify for your state’s First Home Owner Grant (FHOG) and the reduced stamp duty.

Despite these incentives, home building isn’t necessarily always the cheaper or better option. It can be difficult to understand exactly what the total cost will be when taking on construction loans and sometimes costs can blowout, so keep this in mind.

Your location, costs associated with renting while waiting to move into your home, and the need for future renovations are all factors to consider when comparing costs of buying an established property or building a new home.

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Pros and cons of building a house

In 2o20, the average cost to build a house in Australia was $320,000, excluding the price of vacant land. The median costs of land vary between capital cities and regional areas, and there can be hidden costs involved and other factors to consider, such as upgrades to your build, fixtures and appliances, landscaping and more.

Available land in your desired location can be an issue when building, and you may not be able to live close to a city centre as there would be few, if any, vacant lots. You’ll need to think about whether or not easy access to amenities like public transport, hospitals, schools and shopping centres are a priority.

Another disadvantage to your personal objectives may be how long the build process takes. If you want or need to move into your new home quickly, existing homes may be a better option.

The biggest pro of a newly built home is being able to customise your home to your lifestyle and tastes. This includes:

• Layout
• Paint colours
• Flooring
• Cabinetry
• Lighting, and more.

Many incentives for first home buyers can make this a cheaper option, and you will likely build equity sooner with the home owners grant. A fresh build can also be more energy efficient saving you money on your energy bills.

Home buyers buying an existing property

Similarly, the median house price when buying an existing property depends on your capital city or regional centre. Getting solid financial advice from a mortgage broker will help you understand all the costs associated with home loans. If you have a budget in mind, a qualified real estate agent can help you with the home buying process.

For most buyers, you’ll need to pay stamp duty when buying an existing home, and this can cost thousands of dollars. However, home buyers purchasing established homes have less stress than home builders as the buying process is usually faster and easier. Many owner occupiers settle in as little as 30 days, saving a lot of money on rent.

Other advantages include:

• Living closer to the city centre
• Buying into an established area rather than a new estate
• Lower financing costs.

In some cases, you can borrow up to 95% of the property’s value, which means fewer years saving for a hefty deposit. Interest rates also tend to be lower than on constructions loans, which can make home buying a cheaper option.

Consider renovating an existing home

While a more affordable, established home may come with “character”, you can update the look and feel with a fresh coat of paint for those newer vibes. There’s nothing like making a few changes to help you fall in love with your home all over again.

If you can avoid major, costly renovations, like ripping out walls and installing new wiring and plumbing, simply restyle your home with new furniture and a lick of paint to lighten the room and create the illusion of more space.

Ditching carpet in favour of polished concrete or floorboards is a simple way to enhance the spaciousness of your home, while updating the lighting and adding table or floor lamps can breathe new life into your home without breaking the bank.

If you do decide to take the plunge and renovate, ensure you find a builder you can trust. Here’s our handy guide on how to choose the right builder.

Seek trusted advice

If you’re home is a fixer-upper, making extra repayments and leveraging an offset account will go a long way to build equity quickly, which you can use later to fund your renovations.

If you’re looking for personal advice about your financial situation, speak to your relevant credit provider to find out more about your options and how you can get into your new home sooner.