Contingency on a new build?

Hi all,
We have decided to build a house on a site which my wife's parents have been kind enough to gift us. We have arranged a meeting with an Architect, who has come highly recommended from friends. I have already met with a Mortgage Officer in my bank and based on our salaries (both permanent public servants earning 120k combined) mortgage seems not to be a problem. The site is worth 50k, we have 50k in savings, our current house is mortgage free but we don't want to sell until the prices rise further (worth about 110k at present but potential to rise further, I hope!). We have 2 kids in childcare at the moment and feel we can pay a mortgage of 300k without overly stretching ourselves. However anymore than this would put us under unnecessary pressure. We intend to do this once and have it as close to perfect as possible and to be honest my main experience is watching Dermot Bannon on Room to Improve where budgets invariably go well above initial estimates! Would really appreciate input from people who have built in recent times as to whether we should go to meet the architect and be totally upfront regarding our budget or should we go and give a lower figure while allowing a contingency of say 10-20% which we could use in case of overruns/emergencies/extras etc? All help suggestions greatly appreciated!

It's prudent to always keep a contingency. If you budget to your limit, there is no wiggle room if things go wrong with the build or elsewhere in life.

Agreed.

From experience, one of the reasons that budgets expand is that issues arise as a build progresses. When you're starting off, you think you have the whole thing worked out but then someone might come up with a different perspective on an issue that it would be shameful not to act on even though it pushes the budget.

mf

Thanks for the input guys. A contingency is a must so it seems. My wife has read/heard that costs often rise between 15 and 20% above initial estimates. Would 10% be cutting it fine? All replies much appreciated.

Once ever in years of dealing with self build mortgages did I see a house built within the original budget and there was a project manager employed on that job as the owner was living in UK. More often than not top up mortgages were required.

Invariably costs go over for different reasons, one as stated above is that unexpected things crop up. Another major one is that 'nicer' fittings and fixtures are chosen than was originally budgeted for, for example the skirting boards are going in and the deeper fancier one is much nicer but more expensive, the 'sure we'll only do it once' attitude kicks in and before you know it that applies to the taps, bathroom fittings, doors, extra sockets (because there is never enough) etc etc etc. Not to mention when you start on the kitchen.

That I have found was the greatest cause of gradual overspend rather than one big building expense such as hitting rock or similar.

I would think 10% was cutting it fine unless you are both very disciplined with extras.

Thanks Monbrieta. I think you have just given us a window to our future! We would be disciplined in many ways but are definitely in the "sure we'll only do it once" brigade and with the motive of trying to make it as close to perfect as we can, will probably do exactly as you've outlined above. Thanks for the reply it gives some valuable food for thought.