Soft costs

We first met with our architects in January 2022. We didn’t really have a selection process; we asked around for recommendations and read a few reviews online, but basically we met with one firm, really liked them, and plowed ahead.

One thing I loved (among many things) about Hyland Design Group was the detailed information they provided about all of the soft costs involved in our project. It was an education, but there were absolutely zero surprises. Hard costs - the actual building of the house - are trickier to estimate, especially if your answer to the question “how much do you want to spend?” is “I don’t know, how much will a bank lend us?”

Construction loan financing is some straight-up circular business. The answer to “how much will you loan us?” turned out to be “we won’t know until we see your completed plans.” Practically speaking, this means that unless you’ve got a big fat pile of building cash on hand, you’re committing to a significant investment before finding out whether or not the entire project is feasible. All in, we spent about $60k before we could truly engage with lenders. This covered the costs of the surveyor, the soil engineer, the structural engineer, the architects, and some preliminary permits.

The amount that a bank will loan you for a construction project is based on its appraisal of the future value of your property. It will also want to be your only home lender, which means it will absorb your existing mortgage in the transaction. This is a stone cold bummer if your original mortgage was issued back when rates were historically low.

Here’s an example: the bank estimates that your new home will be worth $2.5m upon completion. They are willing to loan you up to 65% of that future market value, which is $1,625,000. If your existing mortgage is $825k, you will have $800k remaining for your project.

Architects and builders will give you construction estimates to work with during the planning process, but these are rough numbers; we heard everything from $450-$650 a square foot. Because square footage dictates so much of the cost, we focused on trying to achieve our primary goals (four good-sized bedrooms, three bathrooms, and expanded shared living spaces) while minimizing the grand total. We also wanted to preserve as much of the backyard as possible. This meant going up instead of out. Our final plans preserve most of the original footprint of the house, bumping out the rear by 2-6 feet (depending on location) and one side of the front of the house by 2 feet.