In today’s home building culture we often get asked about energy payoffs and costs of ownership. These are sometimes difficult questions to answer as there isn’t a plethora of information stating which upgrade pays off when. In some of our previous posts we’ve written about different aspects of a home build and why they matter to you. I hope this post can act as the knot tying a bunch of those loose ends together and show you how each little decision can make a big difference as well as demonstrate approximate costs and savings.
When we talk about costs on a building I find it helpful to think of a house as a sum of many parts. When you buy a house you’ll have the mortgage to worry about for 25 years (plus or minus). That’s a known cost that is often expected by home buyers. What often escapes them however, is the rest of the cost of building ownership. What if I told you there are cost-effective ways to bring the building ownership costs down? Would you want to pursue those options?
For example, you buy a house this year for $500,000. Over the course of the year you pay $5,000 in interest, $2,500 in utilities (because you bought a relatively well insulated house), $2,500 in taxes, $2,300 in insurance (thankfully you’re claims free still 🙂 ) and it was a good year so you didn’t have to replace any shingles, or maintain/upkeep anything on your house. So in the first year you spent $12,300 in building ownership costs. Now in that year your house has risen in value to the Winnipeg average tune of about 2.5% per year. That means your house is now worth $12,500 more than when you bought it. When you do the math you’re $200 ahead. Still with me?
Okay now let’s check out the numbers with House B that has $16,000 in added upfront costs all put towards energy efficient upgrades (perforated exterior styrofoam, upgraded mechanical systems, upgraded windows, LED lighting etc.). Now your houses is worth $516,000 from the start. You now pay $5200 a year in interest, $2550 in taxes, $2350 in insurance and let’s say $1,600 in utilities. This puts your cost for a year at $11,700. Your house grows at the same 2.5% in value so now you’re left with a house worth an extra $12,900 after the year is up. When you do this math you come out ahead by $1,200.
So now let’s say you just save that money in a pillowcase, you don’t even invest it. At the end of your 25 year mortgage you will have an extra $30,000 in your pocket with House B. With House A you will simply have $5,000. Did you follow all that? That means that without calculating rising utility rates, subsidies from MB Hydro for green building, interest on saved money or any other variables, building a sustainably designed house makes sense right now! The total cost of ownership will be lower within just the life of the mortgage. If we were to factor maintenance costs (replacing hot water tank, furnace, shingles, windows etc) into the design you would find that living in House A would actually wind up costing you money, whereas House B would be slightly ahead of breaking even.
If we lost you in some of the math and nitty gritty details, I’d invite you to come chat with us before you build your next house! Let us show you what investing in your home now can do for you down the road! Come build an intelligent home with us!