How to Budget the Cost of Building a Home

Planning ahead for construction-cost control of an energy-efficient home is well worth the effort.

| July/August 1983

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    The architect's illustration of what the interior of the finished Sun Cottage might look like.
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    For our example in this series of articles on planning and building an energy-efficient home, we've chosen the two-bedroom Sun Cottage, an expandable earth-sheltered, passive solar plan with 1,023 square feet. 

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All too many of us have found that building an energy-efficient home seems to be a dream, a fantasy that's kept just out of reach by escalating prices and high interest rates that contribute to the high cost of building a home. Of course, MOTHER has long been exploring ways of breaking this vicious circle of waste, and one inventor of solutions—whose work we've shown you before (starting back in 1981, in an article on earth-sheltered architecture)—is architect Angus W. Macdonald. Angus has developed a number of housing designs that apply low-cost building techniques to passive solar, earth-tempered homes, and he's agreed to relate, in a series of articles that will span at least six issues of MOTHER, much of what he's learned about planning and building such structures. The series will follow the actual construction of one of the architect's standard designs—Sun Cottage—and will include photos and illustrations of each step. 

In our last issue, we covered the criteria for selecting a site for a passive solar, earth-sheltered home. In this installment, we'll discussing detail—another vital pre-groundbreaking step: making (and maintaining) a budget. 

Although effective construction-cost control of a sun-heated dwelling means that you'll have to do a lot of homework before and during the actual building, the payoff for your care will be well worth the effort. Basically, you'll be creating equity in solar real estate, housing that—with the inevitable inflation and rising fuel costs ahead—will increase many times in value in future years. Also, by budgeting carefully, you'll avoid funding shortfalls, and the heartbreak of an unfinished house and an empty pocketbook. 

When you're choosing the plan for your new home, you'll obviously have to be constantly aware of your construction budget. But how do you come up with that figure to begin with? There are several methods, depending on your current financial status and what your expectations are. For example, perhaps you plan to sell your present house to finance the construction of the new, more energy-efficient one. In that case, you'll be building with a fixed-sum budget, one that will be determined by what you can reasonably expect to have after all the selling and moving expenses (along with the purchase price of new land) have been subtracted from the proceeds of the sale. 

Maybe you have a steady job and plan to pay for your new home on a monthly basis, with a mortgage. If so, the amount of money that you can spend on your home's construction will be determined by the monthly loan payment you can afford. The usual rule of thumb for calculating this figure has been to allot one-quarter of your monthly gross income. To cope with the high interest rates that have prevailed for the last several years, however, many lenders are now allowing borrowers to devote a third of their earnings to a mortgage payment. 

Whichever percentage you end up using—and I recommend that you be sensibly cautious and choose the lower of the two—be sure to subtract overhead and utility costs from the fraction of your income earmarked for your house. Fortunately, insurance rates will be comparatively low for a Sun Cottage because of its fireproof construction, and our earth-tempered, passive solar design should require next to no space heating. There will be energy expenses for lighting, cooking, and so on, though, and you'll also have property taxes to pay. (One good guideline to help you judge what monthly payment you might be comfortable with is to evaluate how easy or hard it is for you to meet your present rent or mortgage.) 

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The thing is to keep in mind the starting budget and never move from this line! Any other way, you'll over pass you budget. Or you can have a budget plus a additional "in case" budget. Here are some awesome advice on the subject:


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