How to Beat High Interest Rates – Build a Custom Home!

By Bob Hinz, Owner – HomeWrights Custom Homes

With Comments by Ashley Lawrence – Integrity Bank & Trust

Earlier this year mortgage interest rates were around 3.75% on a 30-year conventional mortgage. At that rate you may have been dreaming of building your new custom 3400 square foot home with a three-car garage and a luxurious deck overlooking a lush backyard and garden.

But recently mortgage interest rates have jumped up and suddenly your vision of building that new custom home is a little blurry. Rising interest rates mean higher monthly payments. What can you do?

Whether you are in Colorado Springs, Austin, Santa Fe, Denver, or Boulder, here are some wise options to consider. Please note, all numbers in this article are estimates and for demonstration purposes only.

How to Beat Rising Interest Rates on That New Custom Home

1. TRIM IT BACK: Build your dream but adjust your expectations. You can…
   • Shave the square footage
   • Postpone finishing off the basement
   • Reduce the number of bathrooms
   • Eliminate one bay in the garage
   • Minimize landscaping
   • Step down appliance brand/quality/size
   • Choose stock plans
   • Simplify the roofline
2. BUY IT DOWN: Buying down your interest rate with points may help lower monthly payments but requires cash up front.
3. ADJUSTABLE RATES: Considering an Adjustable-Rate Mortgage (ARM) with a low intro rate. Helps in the short run. May be a full percentage point or more below standard loan.
4. SHORTEN LOAN DURATION: Using a shorter loan term. The difference between a 30 and 15 year-mortgage payment can be substantial.
5. PUT MORE DOWN: Making a larger down payment is always helpful when possible.
6. CHOOSE A LESS EXPENSIVE SITE: Choose a less expensive place to build or demo an existing home.
7. PUMP UP YOUR CREDIT SCORE: Improve your credit score. Your score determines your rate.
8. STAY LOCAL: Work with a local bank who understands your market. This may help greatly with construction loans as well as your mortgage upon completion. Ashley Lawrence is a consumer loan officer at Integrity Bank & Trust of Colorado Springs and offers this rationale for staying local: “Integrity Bank is a true community bank with all of its locations being within Colorado Springs. We have a deep understanding of the El Paso County market and have many years of experience with providing construction financing to the area.”

“All of our processing is in house which makes for a seamless transaction. Integrity has partnered with HomeWrights on several transactions, and we understand the uniqueness of their owner-builder program and appreciate how HomeWrights works to help people build their dreams homes in a more affordable manner. In a rising interest rate environment, time is of the essence. Together, Integrity and HomeWrights strive to make the process as seamless and efficient as possible.”

SEE ASHLEY’S CONTACT INFO AT THE END OF THIS ARTICLE.

9. BE THE BUILDER: Act as your own general contractor. Cut out the middleman, eliminate markup and manage the project yourself. This could save you $75k, $100k or more.

That last option is where HomeWrights Custom Homes can help. Learn more about the Owner-Builder Program.

Don’t Hire a Contractor. BE The Contractor!

Being your own general contractor may sound intimidating but we help people all the time who have absolutely no experience in construction and they do just fine. Before you tune out, let’s take a quick look at the simple math involved in being your own builder.

If you can build your dream home AND save $70,000, $100,000, $200,000 or more, that means you have that much less to borrow from the bank! Of course you always want the best interest rate but if you can keep building costs down you keep your monthly payments down.

Military Retirees Love a System and a Plan When Building a Custom Home

Dale Quye, Project Manager in the Colorado Springs office says, “We have people from all walks of life that come to us, astounded at how much they can save with this program. We have a big military community in Colorado Springs and we see a lot of military retirees jumping on the Owner-Builder bandwagon.

In fact, my associate, Bryan Fujimoto (Bryan head shot, link to bio)  is retired military and he joined our team after his experience with the Owner-Builder Program. I think many retired military people have learned those skills of discipline, systems, and sticking to a plan very beneficial when they become their own general contractor.”

Look at the Numbers Before Building a New Home

In simple terms (aside from your credit score, down payment, income, taxes, insurance, etc.) a 30-year fixed interest rate at 5.7% on a $800,000 loan gives you a monthly payment of: $4,643. The same calculations on a $700,000 loan gives you a monthly payment of: $4063. That’s a monthly savings of $580 or $6,960 per year. For every $100,000 you lower building costs you’ll be saving over $500 per month in payments!

We’re working with a client right now who estimates his Owner-Builder efforts will save him about $400,000. We have many clients with a wide range of building budget saving $50,000, $100,000, $150,000 or more. So what’s the catch? There is no “catch,” there is just “effort.” You cannot expect to save this kind of money without some work.

Custom Home Building – Time Commitment

Many of our clients are able to manage the entire custom home building process with an average of 20-30 hours per week. Some do much less, some more. It depends on your level of interest, skills, and objectives. Even though this article is focused on how to save money, most of our Owner-Builder clients come to us because they know WHAT they want to build and they know HOW they want it built. These are people that appreciate saving money but they are very clear about what the final product will look like!

“The best paying part time job I’ve ever had!”

We’ve had several clients describe their Owner-Builder experience as, “The best paying part time job I’ve ever had!”   One client proudly proclaimed that he made more money in one year by managing their Owner-Builder home, than his wife ( a prominent contract attorney) made in that same time frame.

Owner-Builder – Success Factors

Being the Owner-Builder is hard work but it pays off in savings and giving you exactly what you want in your dream home. What does it take to be successful by acting as your own general contractor? Here’s the short list of “must haves” to succeed:

1. You are organized and detail oriented. You keep track of people, information, and resources. You are able to watch for the little things that need attention while keeping your eye on the big picture and the ultimate goal.
2. You can manage a checkbook and keep a budget. You pay for materials and people in a timely fashion.
3. Make decisions. You are willing to make decisions quickly. Time is money and delaying decisions will affect not just your schedule but everyone in the chain of subcontractors working on your home. The best time to get something done is NOW! See Bob’s blog post on this
4. Flexibility. This is a custom home that has never been built before so unplanned things naturally come up. Being upset and cranky doesn’t help. Flexibility and a little creativity helps to solve problems and keep things moving.
5. Action oriented. You understand the urgency attitude required to keep a team of workers on task and on schedule. You are willing to get it done today instead of waiting until tomorrow. You recognize the difference between calm urgency and chaotic panic. Cool heads prevail in construction but keeping the ball rolling is critical.
6. Communication. You are able and willing to be kind but firm, clear and respectful – at all times. Building a custom home can be a fun and exciting adventure but the everyday twists and turn are best managed with a little bit of humor and effective communication.

What is the Owner-Builder Program?

The Owner-Builder Program is a system. A system that provides you the success template that we’ve developed over the last two decades. We provide you the resources, paperwork, contacts, and guidance needed to save you money and get the exact home you’ve been dreaming of. From Colorado Springs to Boulder and everywhere in between, people are taking their finances and homebuilding options into their own hands with this powerful program.

Our system has been tested and refined to make sure you have all the resources any competent contractor would have. And, you will also have one of our experienced Project Managers available to help you assess proposals, solve problems, and keep your project moving and on budget.

One of the first things we like to help people with is budgeting. We think you should have a high-level ball-park budget before you start the home design process. When you start with a budget, you design your dream home to fit the budget, not the other way around.

If you would like to learn more about the unique Owner-Builder, building process, there is absolutely no charge to have a discussion with us over the phone or in our office.

About Integrity Bank & Trust

Integrity Bank & Trust is an employee-owned community bank, dedicated to the Colorado Springs area since 2004. Our emphasis is on people – our own employees and our customers. Integrity Bank’s goal is to provide a bank you’re proud to call your own, with a focus on sound lending standards, competitive deposit rates, personalized trust and investment management, and the highest ethical standard of banking service.

One of the greatest benefits of being a true local bank is that we really get to know our customers. At Integrity, we get excited about building relationships – after all, that’s what really matters. We’ll remember your name and ask how you’re doing. We know we’ve got a stake in your success, and we’ll go the extra mile to help you achieve it.

Examples of rates expressed in this article are not current loan products offered by Integrity Bank and Trust. Please contact the Bank to learn more about rates and products offered.

About Ashley Lawrence

Ashley Lawrence just reached her ten year anniversary with Integrity Bank in June 2022. She joined Integrity as a personal banker in 2012 and has been serving the community’s consumer lending needs since 2014 when she became a loan officer. Ashley has a passion for helping people and loves partnering with her customers in some of the biggest decisions of their lives.

The Integrity Mission is to have an enduring impact on the community, and Ashley strives to be true to that mission by truly understanding people’s needs, walking people through the lending process step by step, and helping each person realize their individual goals and dreams.

CALL INTEGRITY BANK & TRUST WITH YOUR FINANCING QUESTIONS!

Ashley Lawrence, NMLS #1216659 – (719) 955-4809

Integrity Bank & Trust, NMLS #439891

Consumer Loan Officer, Owner

Alawrence@integritybankandtrust.com

https://www.integritybankandtrust.com/

CALL HOMEWRIGHTS WITH YOUR BUILDING QUESTIONS!

Denver: 303-756-8870