Land loans: How to finance a vacant land purchase

Many Australians purchase new homes as house and land packages: You pick a block and then build the home, usually choosing from a list of designs offered by the developer. But you can also pick out a piece of land you really like and then sort out the home construction separately. If this is your approach, you'll probably need a land loan.

Although it's harder to find a vacant land loan than it is to borrow money to purchase a house and land package, many lenders now offer vacant land loans to help you snap up that perfect piece of Australia.

Compare vacant land loans

Borrowing amount

$

Period

years

Calculate

Sort by:

Name	Product		Interest Rate (p.a.)	Comp. Rate (p.a.)	Fees	Monthly Payment
Gateway Bank Variable Land Loan P&IHome≥ 20% Deposit		More Info	4.43%	4.49%	App: $200 Ongoing: $0 p.a.	$755	More Info	Compare	loading Fetching your data...
ANZ Land Loan P&IInvestment≥ 10% Deposit		More Info	4.99%	5.09%	App: $600 Ongoing: $5 per month	$806	More Info	No ongoing fee for this loan with a 100% offset account and a redraw facility.	Compare	loading Fetching your data...
AMP Bank Land Loan P&IInvestment≥ 20% Deposit		More Info	5.94%	5.99%	App: $0 Ongoing: $0 p.a.	$895	More Info	Investment loan to fund the purchase of vacant land.	Compare	loading Fetching your data...
ANZ Land Loan P&IHome≥ 10% Deposit		More Info	4.39%	4.49%	App: $600 Ongoing: $5 per month	$752	More Info	Buy vacant land with a competitive interest rate. 5% deposit option available.	Compare	loading Fetching your data...
AMP Bank Land Loan P&IHome≥ 10% Deposit		More Info	4.88%	4.93%	App: $0 Ongoing: $0 p.a.	$796	More Info	Purchase land to build on or hold as an investment and pay no monthly fees.	Compare	loading Fetching your data...

loading

Prev

1 2 3

Next

Compare up to 4 providers

Clear selection

Compare

^{This table displays information about land loans from various lenders. Some of these loans may not be available for purchases of acreages or larger pieces of land. If the green button beside a product is labelled "more info" it means Finder does not currently have a partnership with this lender or a relevant broker. You can contact the lender directly via its own website.}

Can I buy any kind of land with a land loan?

Lenders have specific criteria when lending to borrowers looking for a land loan. Most of the time, you can't just buy any piece of empty land to qualify for a land loan. When a lender loans you money, it is taking a risk. The property or land you are buying secures the loan, meaning the lender can theoretically sell the asset if you can't repay the loan.

So if you're buying a piece of vacant land, the size, location and quality of the land matters.

Factors to consider when buying land with a land loan

• Farm or home? If you're planning to earn money on the land (by running a farm, for example) then you might not qualify for a land loan. Your lender may require the land to be used for a home. But you might be able to run a small hobby farm while living on the land.
• Registered land. Vacant land that has been released by the government for building is called greenfield land. Before you can build on this land it needs to be connected to services and roads and it needs to be registered with the local council. Lenders probably won't approve your loan until the block is registered.
• Are you building on the land? Some lenders require you to have a plan in place to build a home on the land and may require you to start building within a certain timeframe.
• Size and location. A block of land in a major city suburb is going to be a lower risk to a lender than a block in the middle of nowhere. And a very large block of land is going to be a bigger risk, generally, than a smaller block. This doesn't mean you can't get a land loan in a rural area, but your lender may require a larger deposit.

Land loans vs construction loans

You can use a land loan to purchase the actual land you are building on and that's it. A construction loan covers the building of the house on the land. A land loan gives you the money you need to fund the purchase at settlement, whereas a construction loan releases funds in stages as your construction progresses.

Land loans sometimes have a set time period by which you need to finish construction; and a construction loan definitely will have a set time period.

If you have purchased land with a land loan and then need more money to fund the building of your home, you will need a separate construction loan.

Which lenders offer vacant land loans?

There are a range of lenders that 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.
• ANZ. One of Australia's biggest banks, ANZ offers land loans with various options.
• Gateway CU. Gateway offers its land loan with a choice of fixed or variable rates.

How to compare vacant land loans

Consider all of the following features when comparing the advantages and disadvantages of a variety of vacant land 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 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 downsides of a vacant land loan

Frequently asked questions about vacant land loans

• How much can I borrow for different block sizes?

  This can vary greatly between lenders but, as a general rule, the larger the property the lower the LVR you will be able to borrow.

• What will the lender assess before approving my loan?

  The lender will assess factors such as the size of the land, where it is located, how easy it is to access and its access to services, the zoning of the land, whether you intend to build on it and whether you are planning on buying for personal or investment purposes.

• What's the difference between a vacant land loan and a construction loan?

  With a construction loan, the lender will require you to build a home on the land within a certain time period, usually 1 to 3 years. No such requirement applies to vacant land loans.

• What kind of borrowers need a land loan?

  There are many situations in which you could benefit from a vacant land loan. 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. In this scenario a land loan is the best option.