Melbourne, Australia

How to Build a House on a Budget?

Before I and my boyfriend built our first house in 2020, I researched for hours on how to build a home within a budget. We were in our 20s, and our bank accounts weren’t particularly healthy. We had to save hard for a deposit on a home, but we didn’t have enough money left over for upgrades, such as fixtures and fittings or floor plans. We had to learn quickly (and efficiently) how to manage our finances. We had to learn (quickly!) where we could afford a splurge and when we should cut back on our spending.

It’s no secret that building a house can be incredibly expensive. Six factors can help you keep your budget under control: knowing your finances, prioritizing spending, signing a contract with a fixed price, selecting the right builder, and doing thorough research.

How to Build a House on a Budget, Client and Agent Talking About House Design Plans
How to Build a House on a Budget, Client and Agent Talking About House Design Plans

Don’t worry if all that sounds overwhelming. Let us explain:

Make a Wish List

It’s time to create a list of your wishes once you know how much money you can spend on a new home. It’s also a good idea for your partner or children to make a list of their own. You want to make sure everyone is equally happy with their new home.

You can then prioritize your budget by dividing your wish list into must-haves, and nice-to-haves. It’s easy to get swayed when you see flashy upgrades and new home salesmen.

My wish list was as follows:


You cannot live without these things. These are the things you should not consider when choosing a floor plan or a building company.

It’s Nice to Have

You can remove these items if you are short of cash.

You can be as specific or vague as you want during this process. Remember that the more precise you are the easier it is to find the right builder and land.

Get Your Finances In Check Before You Start The Building Process

Before you even think about purchasing land or signing a building contract, it’s important to understand exactly how much money you can afford to spend on your new home. The only way to truly understand your financial position is to consult a professional. No matter what your partner, friend, co-worker, or neighbor has told you, everyone’s financial position is different, so you need to seek personalized advice.

We recommend speaking to a mortgage broker first and foremost, rather than a financial counselor. Why? Because most mortgage brokers won’t charge you for their time, whereas financial counselors almost certainly will.

Once you know exactly how much you can afford to spend on a home, it’s time to start writing a wish list.

How to Build a House on a Budget, Construction Workers Looking At The Floor Plan
How to Build a House on a Budget, Construction Workers Looking At The Floor Plan

What is the difference between a fixed and a variable contract?

Simply put, a fixed-price agreement is set at a specific price. A variable contract can change depending on materials and labor costs. If, for example, the builder’s quote on soil removal was higher than you expected, you wouldn’t have to pay an extra fee if you had a fixed-price contract. But you would if you had a variable-price contract.

Even though fixed-price contracts have become increasingly rare, they are not yet completely extinct! Some small/custom builders will still offer fixed-price contracts in 2022 to remain competitive. You should be aware that some fixed-price builders artificially inflate costs to avoid future price increases. You should proceed with caution. You can always get a quote for a similar building company if you are unsure.

It would be ideal if we could all build with builders who offer fixed prices. But, unfortunately, these contracts are becoming less common and therefore not always an option. You should have an emergency fund (or some wiggle room in your budget) in case future price increases occur.

Prices rose by at least 5 to 10 %… in 2021/2022, which is significant even for the lowest end.

What is meant by a builder’s “base price”?

The base price of a builder is the price at which a floor plan/home starts. It is the cost of building a home (in today’s market) without adding any upgrades or extra inclusions. This figure is also unlikely to include site work costs (if any).

When you first contact a builder they will often quote you their base price. You should therefore expect to pay at minimum 30% higher than the quoted price to cover any structural or design modifications you might want to make.

What is included in the standard inclusions of a builder?

The standard inclusions can vary significantly between builders, so you should ask your salesman a lot of questions. You should at least expect that all structural work (walls and cabinetry) will be included in your base price. You should not assume that the design is included. Upgrades include brick pillars and brick roofing, paint/render, and even colorbond gutters. Tiles from floor to ceiling, certain materials or colors of flooring, and tapware are all considered upgrades.

What about Builder Upgrades, then?

The sky’s the limit when it comes to upgrades for builders! For convenience, I would recommend that you have all of your upgrades done by your builder. If you’re here, I’m assuming you are looking for low-cost options.

Here is a list of all the upgrades that we recommend to be done by the builder. Here are the ones we do not. Everything else can wait until later. External trades can do a lot of work, such as flooring, air conditioning, and rendering.

How to Build a House on a Budget Floor Plan
How to Build a House on a Budget Floor Plan

Selecting A Floorplan

After you have chosen the right builder, now it’s time for a floorplan!

Modifying your floor plan is one of the easiest and most effective ways to reduce the cost of your construction. The smaller the home, the less materials are needed to build it. It is only logical that this would lower your construction cost.

Other ways to reduce costs by adjusting your floorplan include:

Saving money in other ways

Consider some DIY projects after the handover of your new home if you are still looking for innovative ways to cut costs. My boyfriend and I, for example, were able to save over $3000 when we landscaped THE front yard by ourselves.

Other great DIY ideas that you can do include:

The Bottom Line

You can save money when building your new home, but you should not cut corners. You want your new home to be safe, both for you and your loved ones. You want your tenants to feel safe if you plan on renting out the home. It’s not worth compromising your family’s comfort or safety. So, make sure you follow all local building codes. It’s going to be more expensive in the end to tear down an illegal construction.

You can find additional articles in our blogs if you have followed our advice and feel that you still need more information. From the planning phase to the construction stage, we cover it all.

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