What you need to know about home loans for house and land packages

Rates and fees last updated on

Australian house and land packages

Found the perfect house and land package for your dream home? Here’s how to get the financing you need to turn the dream into reality.

If you’ve found a block of land that looks like the perfect site for your new home, you’ll probably need to borrow money from the bank to transform that vacant piece of land into your dream residence. But choosing a house and land package usually means that a regular home loan won’t be an option, so you’ll need to find a loan that can be tailored to suit your needs.

What is a house and land package?

Much of the new home construction that takes place in Australia nowadays is done by property developers. When land is released by the government, developers acquire that land and build the necessary infrastructure to turn it into a residential area. They then either build homes and sell them to homebuyers, or they allow buyers to choose from a number of standard home designs which can be customised to suit individual tastes.

This second option allows you to acquire a block of land and build the home you want, but you won’t be able to fund the purchase of this type of house and land package with an ordinary home loan.

Home loans for house and land packages

Financing for house and land packages can be split into two discrete areas: buying the block of land and then building the home. While it’s possible to take out a separate loan with different lenders for each part of the process, the most common approach is to bundle the land purchase and the home construction together with the one lender.

In most cases, the land can be purchased with a straightforward mortgage loan, which most Australians are familiar with. Once settlement occurs on the land, you then take out a construction loan to finance the build of the house.

A construction loan lets you “draw down” an agreed amount of money at each stage of the construction process. This allows you to pay your builder and also ensures that you only pay interest on the money you use at each stage of the process.

Home loans for house and land packages ingredients2

How do home loans for house and land packages work?

House and land package home loans involve two parts: a regular mortgage and a construction loan.

The regular mortgage applies to the vacant block of land and works just like any other normal home loan – you borrow a lump sum, are charged a fixed or variable interest rate and make regular repayments to pay down the principal and the interest.

Once the land purchase has been settled and a mortgage has been registered on the title, the second part of buying a house and land package involves taking out a construction loan to finance the new home build.

Construction loans are set up a little differently to typical home loans. Rather than borrowing a lump sum, construction loans allow you to draw down money in staggered instalments at set stages of the construction process – for example foundations, frame and brickwork, lockup and completion. These draw down amounts are fixed when you apply for a loan, so you will need to supply fully-costed construction plans to the lender before your loan will be approved.

Along the way, you will only pay interest on the amount you draw down from the loan. But once construction is complete and the builder has been paid, the full mortgage will be in force and you will have to pay interest on the entire amount.

Finally, it’s also worth pointing out that construction loans usually require you to build within a specified time frame, such as one or two years. You can find out more about these mortgages in our construction loan guide.

Finding the right loan

The good news is that it’s not really any harder to obtain financing for a house and land package than it is to take out an ordinary home loan. These types of loans are offered by banks and non-bank lenders across Australia, with most people choosing to bundle an ordinary mortgage and a construction loan together with the same lender.

So if you want to buy a house and land package and create your dream home, compare the interest rates, fees and features on offer from a wide range of lenders. This will help you find the most affordable home loan for your house and land package.

Was this content helpful to you? No  Yes

Related Posts

Bank of Queensland Fixed Rate Home Loan - 3 Year Fixed Rate Discount Rate $150k+ <80% LVR (Owner Occupier, P&I)

Special offer for new lending of $150k or more & under 80% LVR, this offer has been extended.

Bank Australia Basic Home Loan - Variable (Owner Occupier)

A competitive variable rate that allows borrowers to borrow a minimum of $100,000 with a $0 ongoing fee.

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier P&I)

A fixed rate package loan with flexible repayments options. 350K NAB Rewards Points offer available. Terms and conditions apply.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question