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House and Land Package Loans

Comparing your loan options is vital if you’re interested in a house and land package deal, which you can do right here with Savvy.

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, updated on August 8th, 2023       

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House and land package deals are designed to make the process of building and buying a brand-new home easier.  They are the result of property developers, house builders and sometimes lenders working together to offer a package deal for land purchase, home building and home loan.

However, these bundled home loan finance deals may not always be the best loans available on the market, so it pays to find out what alternatives are available. You can save money by comparing loans here with Savvy to make sure you find the best loan deal to suit your individual needs.

The differences between house and land packages and turnkey packages

House and land packages explained further

How do house and land packages work?

House and land packages are a type of home loan provided by property developers, builders and lenders.  Under this arrangement, they work together to offer land purchase, home building and property finance bundled together into one ‘house and land package’.  By agreeing to the package, you get a home loan, your selection of block and a choice between several different sizes and styles of house the builder can construct for you.  However, your loan specifics will depend on the type of package you choose, so it’s crucial you fully understand what your options are when it comes to buying land.

What are the different options available when buying a house and land?

Standard house and land packages

In this instance, the property developer, the builder and a lender work together to present new home packages to buyers. You’ll first need to buy a block of land, before working with the builder to either design a unique home or choose a design from a range of homes they can erect on your block. 

You’ll take out a second loan to cover the construction of your home, which will be a construction loan, to allow you to be approved for a pre-agreed loan amount at a fixed interest rate, with the borrower able to make progress payments directly to the builder (known as draw-downs). You only pay interest on the money you’ve used until the house is complete.  The loan then reverts to a more standard principal and interest loan, with a variable or fixed rate.

Buying a turnkey package

This involves agreeing to buy your house once it’s built (also known as ‘move-in-ready homes’ or ‘complete’ new homes).  You’ll buy the house and land together from a developer, rather than having separate loans for each.  The phrase ‘turnkey’ means all you have to do is turn the key to open the front door of your brand-new completed home.

Buying a vacant block and building yourself

You may either find a vacant block in an established area or buy one on a new housing development under construction. This option gives you total freedom to build your dream home and can potentially save you a great deal of money, but it's important to note that you’ll have to organise every aspect of the house building and utility connection yourself.

Do I have to go with my developer’s lender for my house and land package?

No – you’re under no obligation to use the lender recommended by your builder or developer.  It's a good idea to compare with Savvy to check that your lender is offering you the best construction loan around, as you can save a considerable amount by sticking with your preferred lender.

For example, one major builder is offering house and land packages with a loan comparison rate of 4.88% from their partnered lender.  However, an almost identical construction loan can be had for a comparison rate of 3.2% from another lender.  This big difference in loan comparison rates could save you hundreds of thousands of dollars in interest, as illustrated by the chart below

Comparison rate of P&I loan Loan amount Term of loan Monthly repayments Total interest paid over the life of the loan
4.88%
$600,000
30 years
$3,178
$543,746
3.20%
$600,000
30 years
$2,595
$334,129

Top tips for what to do before signing your house and land package deal

Choose your developer carefully

Do plenty of background research to ensure your property developer has a good reputation and has completed successful projects previously.  If you can, visit previous housing developments to get an idea of how your neighbourhood might look when complete.

Make sure your land has no hidden history

Ask in the nearest library or council chambers to find out what the land had previously been used for.  Check there’s no possibility of soil pollution or groundwater contamination in the location, as such issues can be expensive to remedy.

Ensure public transport is planned

Public transport may be an important issue either for you now or your children or house resale value into the future.  Make sure the new housing development is connected by public transport and that bus routes are planned for your neighbourhood.

Read your contract carefully

Whichever type of house and land package mortgage you choose, make sure you read your contract carefully and ask for clarification if you don’t understand anything.  Pay attention to all the fine print and exclusions, as these can be significant.

Know exactly what is included in the price

You must be aware of exactly what you’re getting when you sign your house and land package contract.  Check for inclusions like carpets, window blinds, a dishwasher, a clothesline, landscaping and paving.  Leave a buffer in your home budget for unexpected extras which may be needed.

Your frequently asked questions about house and land packages

Are there any low-deposit options for house and land package loans?

Yes – there is a range of low-deposit loan options available for house and land package finance, with some only requiring 5% or 10% deposits.  This is the case for land purchase, for which you can supply as little as 5% upfront, but turnkey loans generally require a minimum of 10%.  However, in most cases, you’ll need to put down a deposit of at least 20% for both land and construction loans to avoid Lenders Mortgage Insurance (LMI).

How long does it usually take to build a house?

It normally takes between six months and a year to physically build a house, but many factors can cause variations in this timeline.  It's best to anticipate multiple delays throughout the process.

How do I find the best builder for my new home? 

Research your builder and property developer carefully, and ensure they have a good reputation and are accredited by either the Federation of Master Builders or the National Federation of Builders. Check their credentials online; don't just take their word for it.

Are interest rates on a house and land package loan generally higher than standard home loans?

No – construction loans and first homeowner loans and packages are usually in line with standard home loans, but you should make sure you compare loans thoroughly with Savvy to ensure you get the best deal available.

After I get my construction loan approved, how long do I have to build my home? 

Construction loans typically have interest-only repayments for one year, so this is the time you have to build your house. If delays do happen, and you think your home won’t be finished within a year, talk to your lender as soon as possible to find out your loan extension options.

Do I have to pay stamp duty when I buy a new home?

Yes – stamp duty is a state-based tax which applies to the sale of all property, including newly-built homes. However, most states and territories offer exemptions and concessions to people who qualify for first homebuyers’ assistance schemes.

Can I refinance once my house and land package loan reverts to a higher interest rate?

Yes – it’s quite common to refinance once a construction loan has served its initial purpose.  You can compare many different loan options right here before deciding to refinance.

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