Should you buy or build your house?

The question of which is the better alternative as regards building or buying is evidently not a simple one as both sides clearly have their pros and cons. There are some tips you can follow that can help you come to a logical conclusion as to which option best suits you or your family.

Consult
First and foremost, consult widely before you do anything and don’t under any circumstances be afraid to do so.
Becoming a home owner is one of the most important decisions you will ever make in your life; just like getting married it will impact significantly on the relationship with your family and friends, your professional life and even standing in society. So getting it right the first time is crucial, don’t rush into a decision to buy or build without talking to people you trust or more importantly have been there before.
Family and friends are a natural starting point, however do not rely on them alone.
Get advice from a professional such as a mortgage arranger in your bank for an alternative opinion they will give you independent advice based on financial facts and not emotions.

Analyse the nature of your cash flow
Secondly analyse the nature of your cash flow and level of disposable income.
If you are a salaried employee with a reasonable net salary, it is a lot more advisable to go for an outright purchase given that employees typically have access to credit financing and can purchase a property with just a small deposit.
Buying a home using mortgage financing allows you to enter immediately and use the savings you make from not paying rent towards the mortgage.
If on the other hand you are in business, buying a finished house is generally not a viable alternative as it often requires you to withdraw a relatively large amount of capital out of the business and put it in an asset that is non-income generating.
Such a move can negatively impact your cash-flows and lead to business failure.
Taking small fixed amounts over time will lessen the load allowing you to build slowly at your own pace in a pay as you go manner.

CAUTION
Whichever alternative you choose, look at your first home as a long term investment and one that should help you start climbing the property ladder. Remember unless you have absolutely no ambition it is highly unlikely that your first home will be your last.
So if you are looking at buying a readymade property try and find one that has the potential for expansion this will make the property a lot more attractive to potential buyers when you decide to move further up the ladder.
If you decide to buy an empty piece of land, buy a big one even if you have to go a little further out of town, this will give you the option of building a smaller house strategically in one corner and your dream house at the center of the plot later on.

Save
Save before making either decision whether you are buying or building you will need some form of cash buffer to pay a deposit to the financial institution for the mortgage or to buy the land besides you will also need money to start the actual construction. Saving for a given period (Six to 12 Months) before taking the decision will give you a very good indication of your financial capacity and willingness to undertake the property plunge.

Brian Mutungi is The Head Of Home Loans Stanbic Bank Uganda