10 Ways to Avoid Going Over Budget When Building a New Home

One of the biggest worries people have when considering building is how they will avoid going over budget when building their new home. One way to minimize worry is to create a rock-solid budget with a builder you trust, and then stick to it.

Not sure where to start? We’ve got 10 great tips to ensure your budget is feasible and stays on track during the build.


  1. Ensure allowances are adequate


When it comes to items like cabinets, countertops, flooring, lighting, etc., you can avoid going over budget by ensuring the dollar amount the builder has allocated is suitable for what you’re expecting. If you’re expecting quartz countertops, but they’ve only allocated funds for laminate, you’re going to end up with a big discrepancy (and disappointment).

It’s a good idea to ask the builder to provide examples of what the allowances will cover, or ask how they calculated the amount. Some builders will use low allowances (or not provide you with allowances) to quote at a lower price, only to have the homeowner exceed their budget to get the home they truly want.


  1. Make most of your selections before building


This step is crucial to avoid going over budget when building a new home. If you want to avoid price surprises during construction, then you should be making the majority (or all) of your selections before the shovels hit the ground. This includes designing and pricing out cabinets, selecting flooring, choosing exterior materials, as well as the multitude of smaller choices in between. Many selections have various options and price points. Solidifying these details at the start is always a smart move.

We use the term “price confidence” when describing our design and selections process. Our designers help you make all of your choices and determine your final house cost BEFORE you sign an agreement to build the house.

However, that doesn’t mean your price may not increase as you are making choices in the design phase. However, we feel it’s important to have pricing information available to you before you make the final decision on proceeding with the build.


  1. Avoid making changes


When building a house, it helps to be decisive. Being comfortable with decision making will help you avoid going over budget. Research your design and material options thoroughly.  When it comes time to make a decision, you’ll be confident in your selections and can stick with them. If you change your mind on materials or designs after they’ve been approved, the extra costs can add up quickly. Change order fees, restocking fees, and mistakes are a possibility when there’s a change to approved plans.


  1. Exercise discipline


If staying on budget is crucial for your finances, you’ll need to be disciplined in your decision-making. Prioritize what is most important for you (the must haves, and then the nice-to haves). We’ve written an article here on how to balance the wants and needs in your new home. Be honest with yourself about what is a must have and what is a nice to have. Not everything can be a must have!

Some of our clients are great at staying within their budget. Others are more interested in building their home exactly the way they want it, even if it’s outside their budget. Either way is fine — just decide which route you’re going to take before you break ground.


  1. Obtain price checkups during the design phase


We provide our clients with “Price Checkups” during the design phase. The purpose of these checkups is to inform our clients how the current house details and costs compare to the original quote and specifications.

Furthermore, the price checkups help to put a value on the changes made during the design phase that may not be easily quantifiable. For instance, if the house size went down by 100 sq ft or the garage became 50% larger, we outline the cost implications of these choices. This allows our clients to pivot during the design phase if they need to make changes avoid going over budget.


  1. Use budget-tracking software


Online home building software keeps everything organized and in one place. We use this software with all our clients. The biggest benefit is the budget-tracking feature.

Our clients can log in 24/7 to make selections. They can receive real-time feedback on how their selection decisions will affect their budget. You can see where your budget stands during all phases of construction. No guesswork means no unexpected surprises.


  1. Get everything in writing – and then read it!


One of the best ways to avoid going over budget is to request a very detailed list of specifications from the builder and read them. This way you know exactly what you are getting.

You’re more likely go over budget if you don’t have detailed specifications and are forced to assume what’s included. Have you verbally asked your builder for a back deck, but it’s not included in the budget? If it’s not in writing, the builder doesn’t necessarily have to include it in the home.


  1. Request a fixed-price contract


For a better chance at staying on budget, ensure you hire a builder who provides fixed price contracts. This means that all building costs (other than allowances) are the responsibility of the builder. If the builder didn’t estimate costs correctly, they pay for the discrepancy.

Some builders will use a cost-plus” style of contract. Be aware, this shifts the burden of miscalculated estimates and cost overruns onto the homeowner. This is exactly what you don’t want if you’re trying to stick to a budget.


  1. Don’t forget the taxes


This one is pretty simple. Make sure your builder has included GST and PST in the price or you will have a large and unwelcoming budget surprise in the end!


  1. Build in your own contingency


Lastly, having a contingency plan will help you avoid going over budget. You will want to plan for your own internal cost contingency over and above the value of the new home quote. This buffer of funds can allow you to splurge on a few items without feeling guilty. The extra bit of budgetary breathing room will make the process more enjoyable.