Vacant Land Home Loans

How to compare financing options to purchase Australian land with a vacant land home loan

If you’ve got your eye on a block of land that you’d love to buy and build a house on ‘one day’, a vacant land loan could offer the funds you need. Although it’s typically harder to find a vacant land loan than it is to borrow money to purchase a house and land package, many lenders are now offering vacant land loans to help you snap up that perfect piece of Australia.

How does a vacant land home loan work?

As the name implies, these loans can be used to purchase vacant blocks of land. The land must typically be non-income producing, while different lenders may impose different loan conditions depending on the size of the land you plan on buying. These special types of loan often take the place of home loans, because some lenders won’t allow you to take out a home loan if there is no habitable dwelling on the property you are buying.

In some ways a vacant land loan is similar to a construction loan, but the key difference is that construction loans place a time limit on when you must complete the building project on your property. This limit is usually set at between one and three years. With a vacant land loan, however, there are no time pressures attached in terms of when you need to start or finish construction.

Which lenders offer vacant land home loans?

There are a range of lenders which offer loans for vacant land. These include:

• AMP - AMP's Land Loan allows you to purchase vacant land and comes with a redraw facility and more.
• Gateway CU - Similar  to AMP, Gateway offers their Land Loan. This comes with your choice of fixed or variable rates and more.

How to compare vacant land home loans

Consider all of the following features when comparing the advantages and disadvantages of a variety of vacant land home loans:

• Rate. The interest rate is a hugely important feature on any home loan because it plays a big role in determining how much you will have to repay over the life of the loan. However, the interest rate doesn’t take any of a loan’s fees into account, so make sure to look at the comparison rate as well.
• Fees. Some loans may have hidden fees so always ensure you’re fully aware of any fees that apply to your vacant land home loan.
• LVR (loan to value ratio). As vacant land is harder for a lender to sell in the event that a borrower defaults, many lenders take quite a conservative approach when offering land loans. As a result, you may find that some lenders offer a lower maximum LVR than you would expect, so compare this feature before you apply.
• Repayment options. Can you make additional repayments at any time? Can you pay the loan off early without incurring a fee? Can you choose a repayment schedule (weekly, fortnightly or monthly) to suit your budget?
• Other features. It also makes good financial sense to look at the other features a lender may provide, including redraw facilities, offset accounts and loan split options.

The benefits and considerations of a vacant land home loan

When might a vacant land home loan suit me?

There are many situations in which you could benefit from a vacant land home loan, all of which would obviously require you to seek finance to purchase a vacant block of land. For example, perhaps you’re building an investment portfolio for your retirement, or maybe you simply want to snap up a prime piece of land while it’s available. Of course, you may also plan to build your dream home on that land one day. You might just have to wait a few years until you can afford to do so.

Frequently asked questions about vacant land home loans