Whether you’re looking to build your dream home or just purchase vacant land as an investment, untitled land can be an affordable way for first home buyers to enter the property market.

So, what are the pros and cons of titled land vs an untitled lot?

The big difference between titled and untitled land

Titled lot

Titled land is simply land with an official record of who owns it through a Certificate of Title registered with the Land Registry.

If your land is titled that means you can get started on building a property.

Untitled lot

Untitled land is unregistered land that is sold prior to council registration and is typical of new estates or new land releases usually offered by property developers.

Buying unregistered land requires you to sign a Contract of Sale with a developer who will develop and register the land for you.

You’ll generally pay a deposit equal to 10% of the land value.

The contract essentially states that the developer promises to deliver a block of land at some point in the future for an agreed upon price.

Do banks accept untitled land as security for a mortgage?

You can apply for a pre-approval to buy unregistered land based on an assessment of your borrowing power.

However, before a bank can give you unconditional mortgage approval for vacant land they first need to order a land valuation.

The valuer can only value the land once it is registered.

That’s because banks are most concerned about the marketability of a property that they take on as security for your home loan.

Banks are averse to speculative investing because their business is in home loans and not in making a profit from the sale of a property that may or may not be built.

Similarly, you don’t completely own an untitled lot until the Certificate of Title is issued in your name.

What are the benefits of buying untitled land?

If most banks have a problem with untitled lots, why would you ever consider buying one?

  • You may generate a significant return on investment if you later sell the property to a developer (there can be a long period between when you pay your deposit and reach a settlement).
  • Alternatively, you may decide to subdivide the block, title them, and build multiple units.
  • You are likely to pay less stamp duty with unregistered land than an established property simply because stamp duty is calculated on the value of the land, and land value increases dramatically along with suburban development.
  • You can build your house to your own specifications, rather than buying a pre-built home.
  • It’s very hard to find titled land for purchase in and around major cities so untitled land is a great way to get your foot into an emerging market.
  • After paying the initial deposit, the remaining balance is not due until the land is completed which means you’ll have more time to save or to bolster your cash flow for further investment.

What are the risks of buying untitled land?

Despite the great benefits, buying unregistered land has inherent risks which should be considered before signing the contract, such as:

  • The developer’s subdivision plans may not be approved by the council and other relevant authorities.
  • Some unscrupulous property developers may cancel the contract (sunset clause) if they find that they can resell the land at a much higher price.
  • You cannot leave the contract before the due date which can sometimes be as long as 48 months away.
  • The council may place zoning restrictions on the block which may prevent may prevent certain construction work being undertaken.
  • Contracts for unregistered land tend to be long and complicated so you should seek legal advice from a solicitor before you sign the contract.

How long does the titling process take?

When you sign a Contract of Sale with the vendor (seller), they will inform you of the expected title date.

The titling process usually takes anywhere between 12-18 months before the developers have transferred the title and are ready to build.

It is a long process and delays with construction, adding utilities, council delays, and bad weather should be factored in.

With land in such high demand, particularly in and around metro locations, people are purchasing untitled land from developers and this boom has increased the time it takes for land to be titled.

When is the earliest a bank can do a valuation?

After the council has registered the land with the Land Registry, the developer will inform you that your land is ready to be titled.

If you’ve already gotten pre-approval with a lender, they will order a valuation of the land.

It is always advisable to apply for a home loan once you’re less than 3 months away from the settlement date as indicative approvals only last for 3 to 6 months.

You should seek legal advice from a conveyancer to help you transfer the land title from the developer to you.

Once the date has been set for the land title to be transferred, you can exchange the contract and move to land loan settlement..

Give us a call on 1300 889 743 or fill in our online assessment form to find out if you qualify for a vacant land loan.