There are two ways to buy a new home

Buying land and later building on that land with a construction loan is a popular way to buy a new property.

On the other hand, turnkey properties, although a little more expensive, are becoming more common because they are much less complicated and allow you to move in right away.

What type of house and land package loan so you need?


What is a house and land package?

The first type of house and land package is where you buy the land and then build the house later.

You can apply for a vacant land loan with one lender and construction loan with another.

However, you would normally do this if you don’t plan to build on the land for more than two years.

House and land package loans are bundled together as a deal but the general requirement is that you start your build within two years.

On other hand, a ‘turnkey’ package is a particular type of house and land package where developers buy the land, build the home and then sell them as a completely new house and land deal.

The turnkey property comes with everything you need to move straight in including:

  • Landscaping
  • Gardens
  • Driveway
  • Fences
  • Gates
  • Clothesline
  • Letterbox
  • Carpets
  • Lighting

How much can you borrow?

Which house and land package loan do you need?

  • Buying land first: You can generally borrow up to 95% of the value of the block of land.
  • House and land package: You can borrow up to 95% of the value of the of the on completion value of the completed house and land package.

Discover if you qualify!

Call us on 1300 889 743 or complete our free assessment form today.


What documents do I need to provide?

Firstly, you’ll need to provide standard financial evidence to prove that you can afford to borrow the amount you need including:

  • Your last 2 payslips.
  • Your most recent tax return.
  • Evidence of your deposit typically in the form of a 3-6 months’ history of savings in a bank account.

For the construction specifically, you’ll need to provide:

  • A fixed building contract.
  • Building plans.
  • Building specifications.
  • Quotes for additional work.

If you’re buying a turnkey property, all of these costs are built into the contract just like a normal Contract of Sale.

To get a better idea of the documents required to apply for a house and land package loan, check out the construction loan documents page.


How does the loan work?

Buy the land and then build

With a typical house and package loan, the first component is the loan for the vacant land, which in itself is like a normal home loan.

The amount you can borrow depends on the size of the block but, with a typical-sized block, you can borrow up to 95% of the value of the land.

The second part of the loan is the construction loan component.

You will be approved for the construction component once the bank’s valuer has completed an “on-completion valuation” based on the fixed building contract.

The construction loan is typically “drawn down” in five stages.

The bank will make progress payments to your builder at the end of each stage – you just need to sign off on the invoices and costs the builder provides you.

The bank will also inspect the work on a regular basis to ensure that the build still matches the agreed building contract.

The method of making progress payments offers a level of protection to the bank but it also benefits you because you only have to make interest only payments until the build is finished.

Once finished, your mortgage will kick in and you’ll start making principal and interest repayments.

Check out the construction loan tips page for some more tips and guidance on building a home.

Turnkey finance

With a turnkey property, the complete cost of the land and build is set out in a standard sale and purchase agreement between you and the builder.

You will typically have to pay a 10% deposit at the point of signing the contract with the balance being payable at completion of the build process.

In order for the remaining funds to be released to the builder, the house must be fully completed and ready to move in with your state’s equivalent code compliance certificate.

If you only have a 5% deposit (and you qualify for a 95% turnkey loan), the bank will normally lend you the additional 5% deposit to make up the 10% deposit required for the builder.


The benefits and drawbacks of each type of build

Buy the land and then build

For many first home buyers that choose to buy a new home, they prefer to have a say in the final look of their home.

A typical “buy land now and build later” approach is also a cheaper option than a turnkey loan.

The reason is that while the property is being built, you pay interest only on the construction component.

In the meantime, before you start building and the builder draws down their first progress payment, you can get a head start on making repayments on your land loan and leverage the benefits of land equity.

You may even qualify for a stamp duty concession and even claim interest only payments on tax.

Please speak to your accountant about claiming tax benefits.

Turnkey

Turnkey builds tend to be a little more expensive.

However, the big benefit for many first home buyers is the fact that you only start making your mortgage repayments once the property is complete and your home loan is settled.

You won’t have to contend with making progress payments while trying to pay rent.

You can also claim a stamp duty concessions.

Want to know more about a house and land package loan?

Speak with one of our mortgage broker about your situation by calling 1300 889 743 or by filling in our our online enquiry form.


Do you have a deposit?

You generally need to have a 5-10% deposit to qualify for a house and land package loan.

Struggling to save a deposit?

You may qualify for a deposit bond or your parents may be in a position to act as guarantors for your loan.

Get in touch to find out if you qualify.


Do banks have preferred builders?

Your builder needs to be licenced and registered with your state’s relevant Master Builders Association.

Other than that, banks don’t have preferred builders.

However, they have been known to ban dodgy builders in the past so it’s important to do your due diligence and check that they’re licensed.

Below are developers that banks deal with on a regular basis:

  • Metricon Homes
  • BGC (Australia)
  • Meriton Apartments
  • ABN Group
  • Brookfield Multiplex
  • Simonds group
  • Henley Properties
  • MJH Group
  • Burbank Homes
  • GJ Gardner Homes
  • Mirvac group
  • Porter Davis Homes
  • Carlisle Home Pty Ltd
  • Hickinbotham Group of Companies
  • JWH Group
  • Masterton
  • Pindan Pty Ltd
  • Impact Homes Pty Ltd
  • L.U. Simon Builders Pty Ltd
  • Beechwood

Do your due diligence

When choosing a builder or developer, find out what their experience is.

Ask them to provide contacts for their customers and ring them to find out their experience and whether they were happy with the final product.

Other questions to ask include:

  • How long have they been building and how packaged homes have they sold?
  • Do they have an acceptable level of builder’s warranty and insurance?
  • Ask them what isn’t included in the fixed price contract!

What if I make changes to the building contract?

Try to avoid this if you can.

Changes that could blow out the building costs by even just $100 may require you to complete an entirely new house and land package loan application.


Do I get the First Home Owners Grant?

Yes, the First Home Owners Grant (FHOG) is available when purchasing a new house and land package.

If you’re building and not buying a turnkey property, the cost of the grant will be paid directly to the lender when the first drawdown is made to the builder.

Use the FHOG calculator to find out what you qualify for in your state.


Golden tips

  • Make sure you have a sufficient deposit: Some lenders may require you to use all of your deposit to pay the initial invoices before releasing funds from the construction as proof that you have a big enough deposit.
  • Have a buffer: Building costs can quickly blow out and, on top of that, a shortfall in the valuation means you’ll need to provide additional funds to cover the cost of the construction or land purchase.

Apply for a house and land package loan

Discover if you qualify for a house and land package or a turnkey loan.

Call us on 1300 889 743 or complete our free assessment form today.

  • Brent

    I’m not sure if I should go for a house and land package or just for a land loan now and a construction loan later. Building finance seems complicated and I’m actually a first home buyer too. My grandad has also recently decided to gift me a piece of land he owns outright but I will only get it in like a couple months. Would I be able to use equity in the land to help with a building loan?

  • Hi Brent
    Whether you get a house and land package loan or separate vacant land loan and construction loan, each have their own benefit and drawbacks. We can’t give you any financial advice so it’s best you decide this with your accountant or a professional financial adviser. However, what we can say is that you can indeed use the equity in land you own as a deposit for a building loan though not all lenders may accept this. If you’d like to learn more about this, check out the land equity construction loan page:
    https://www.homeloanexperts.com.au/home-loan-articles/land-equity-construction-loan/

  • Christian

    We’re 2 applicants wanting a house and land package. We’re both PAYG workers in the job for over 5 years. Can we get a 95% lend split contract? We went with a lender earlier but they declined as they wanted option to purchase and not split contract.

  • Hi Christian,
    We may be able to help you secure this though it may be with other smaller lenders than a major bank. You can also consider doing a guarantor loan to make the deal stronger. Please call 1300 889 743 to discuss with an expert house and land package specialist, or simply enquire online:
    https://www.homeloanexperts.com.au/free-quote/