Why House and Land Packages Attract First Home Buyers
House and land packages give you a brand new home without the hassle of managing separate land purchases and construction contracts. You buy the land and the building contract together, usually through a developer, and settle the land first while construction happens over the following months. The appeal is obvious: new appliances, new warranties, no immediate maintenance, and access to grants that don't apply to established homes.
Consider a buyer looking at a house and land package in a growth corridor. The land component might settle within 60 days, but the building won't be ready for another 10 to 12 months. During that time, you're paying interest on the land loan but not yet living in the property. That gap between land settlement and practical completion is where most buyers need clear budgeting and patience.
The financial structure is different to buying an established property. You'll need a construction loan rather than a standard home loan, and your lender will release funds in stages as the build progresses. Understanding how draw-downs work and how interest accrues during construction is part of getting your budget right from the start.
What Deposit Do You Actually Need
Under the Australian Government 5% Deposit Scheme, eligible first home buyers can purchase with a 5% deposit and no lenders mortgage insurance. The scheme has no income cap and no annual limit on places, which makes it accessible to a much wider group than previous programs.
For a house and land package, the 5% deposit applies to the total contract price, which includes both the land and the construction cost. If the package is priced at $700,000, you'd need $35,000 as your deposit, plus enough for stamp duty concessions or exemptions depending on your state, and settlement costs including legal fees and any developer levies.
In practice, many buyers still aim for a 10% deposit because it opens up more lender options and sometimes better interest rate pricing. If you're combining the scheme with a state grant, the grant can often be applied at land settlement or held in trust until construction is complete, depending on your state's rules and your lender's requirements. Double-check the timing with your broker before you sign anything.
How Government Grants Work for New Builds
State first home owner grants apply only to new homes, not to established properties. The grant amount and eligibility rules vary by state. In New South Wales, the grant is $10,000 for new builds with a cap of $600,000 for homes or $750,000 for land and build contracts. In Queensland, the grant increased to $15,000 from 1 July 2026 for new homes valued under $750,000. In the Northern Territory, the HomeGrown Territory Grant offers $50,000 with no price cap for contracts signed between October 2024 and September 2027.
These grants don't reduce your deposit requirement directly, but they do reduce the amount you need to borrow or provide as cash at settlement. Most lenders will let you use the grant as part of your genuine savings or apply it at land settlement if the state allows early release. Some states require you to settle the property before the grant is paid, which means you'll need to cover the full settlement amount upfront and receive the grant afterward.
If you're buying in South Australia, the $15,000 grant has no price cap for contracts entered into after 6 June 2024, and stamp duty relief also applies with no cap on new homes and vacant land. That combination can save you tens of thousands compared to buying an established home in the same price range.
Stamp Duty Concessions on House and Land
In Queensland, buyers purchasing new homes or vacant land as first home buyers receive a full transfer duty concession with no price cap for contracts signed on or after 1 May 2025. Stamp duty is reduced to nil on the residential land component, which can mean savings of $20,000 or more depending on the contract price.
In Victoria, a full stamp duty exemption applies to properties valued up to $600,000, with a sliding concession up to $750,000. In New South Wales, the exemption applies to new and existing homes valued up to $800,000, with a concession between $800,001 and $1,000,000. Vacant land in New South Wales gets a full exemption up to $350,000 and a concession up to $450,000.
Western Australia recently updated its First Home Owner Rate of duty thresholds. From 7 May 2026, a single statewide threshold applies regardless of location, with no duty payable on homes valued up to $600,000 and a concessional rate on homes between $600,001 and $800,000. For vacant land, no duty applies up to $450,000, with a concession up to $550,000.
These concessions stack with the federal 5% deposit scheme, which means you can access a low deposit and reduced or nil stamp duty on the same transaction. That combination is often the difference between needing $50,000 upfront and needing $15,000.
Construction Loan Draw-Downs and Interest During the Build
When you finance a house and land package, your lender sets up a construction loan that releases funds in stages as the build progresses. Typical stages include slab down, frame up, lockup, fixing, and practical completion. The builder invoices the lender at each stage, and the lender's valuer inspects the site before releasing the next payment.
During construction, you're only paying interest on the amount that's been drawn down, not on the full loan amount. If $400,000 has been released and your loan is $650,000, you're paying interest on $400,000 until the next stage is completed. This is called capitalised interest, and it gets added to your loan balance at practical completion unless you're making payments during construction.
In our experience, buyers who budget for interest-only payments during the build find it easier to manage cashflow, especially if they're still paying rent elsewhere. Once construction is complete, the loan converts to principal and interest repayments, and you can start using offset accounts or making extra repayments if your loan structure allows it. Make sure your construction loan is set up with the features you'll need once you move in, not just the features that suit the build phase.
Timing Your Land Settlement and Construction Start
Land settlement usually happens within 60 to 90 days of signing your contract, but construction might not start for several months after that. Developers often stage land releases, and your block might not be titled or ready for handover until civil works and services are complete across the entire stage.
Once you settle the land, you own it, and you're paying interest on the land loan from that point. If construction is delayed because of weather, labour shortages, or supply issues, you're still making those payments without living in the property. Buyers sometimes underestimate how long that holding period can be, especially if the builder's schedule slips.
As an example, a buyer settles on land in March and expects construction to finish by December. The build runs three months over due to wet weather and material delays. They're now paying 15 months of interest on the land component instead of 10, which can add several thousand dollars to the total cost. It's worth building a buffer into your budget and confirming the builder's current lead times before you commit.
Pre-Approval for House and Land Finance
Getting pre-approval before you sign a house and land contract is not optional. Developers usually give you a 14-day cooling-off period, and you need to know your borrowing capacity and loan structure before that window closes. Lenders assess house and land packages differently to established homes because the security doesn't exist yet and the build carries completion risk.
Your pre-approval will be conditional on the lender reviewing and approving the building contract, the land valuation, and sometimes the builder's insurance and licensing. If the contract includes non-standard clauses or the land valuation comes in below the purchase price, your approval can be delayed or reduced. That can leave you scrambling to find extra deposit or renegotiate the contract.
Lenders also want to see genuine savings, stable employment, and a clean credit file. If you've changed jobs recently or you're on probation, some lenders won't proceed until you've completed a certain period in the role. Others will accept a letter from your employer confirming your position is ongoing. Knowing which lenders are flexible on employment and which require six months of payslips can save you weeks during the approval process.
Fixed or Variable Rate for a Construction Loan
Most construction loans start on a variable rate during the build, then give you the option to fix part or all of the loan once construction is complete. Some lenders let you lock in a fixed rate at the start, but the rate only applies once funds are fully drawn. That means if rates rise during construction, you're protected, but if they fall, you're locked into the higher rate.
Variable rates give you flexibility during the build, especially if you want to make lump sum payments or use an offset account once the loan converts. Fixed rates give you certainty on repayments, which can be helpful if you're budgeting tightly or you expect rates to climb. Splitting the loan between fixed and variable is common, especially for buyers who want some certainty but don't want to lock in the full amount.
Interest rate pricing on construction loans can be slightly higher than standard home loans because of the additional administration and risk during the build. Some lenders offer discounts if you're using the 5% deposit scheme or if you're a first home buyer accessing a state grant. Comparing rate offers across multiple lenders before you sign the land contract usually saves you more than negotiating after the fact.
What Happens If the Builder Goes Bust
Builders in Australia are required to hold home warranty insurance, which covers you if the builder dies, disappears, or becomes insolvent during construction. The insurance is usually arranged by the builder and noted on your contract. If the builder can't complete the work, the insurer will either pay for another builder to finish the job or compensate you for the loss, depending on the policy terms and the stage of construction.
The risk is higher with smaller builders or builders working in regional areas where there's less competition. In the past few years, several volume builders have collapsed, leaving buyers with half-finished homes and lengthy insurance claims. Your lender will check that the builder holds appropriate insurance before they approve the loan, but it's worth confirming the insurer's name and the policy limits yourself.
If construction stalls, you're still liable for interest on the amount already drawn down, and you can't move into the property until it's finished. The insurance claim process can take months, and you might need to continue paying rent or interest during that time. It's not common, but it's also not unheard of, and it's worth knowing your position before you sign.
Loan Features You'll Want After You Move In
During construction, your loan is interest-only and you're focused on draw-downs and progress payments. Once you move in, the loan converts to principal and interest, and the features that matter change. An offset account becomes useful because any balance in the account reduces the interest charged on your loan without locking funds away in the loan itself. Redraw lets you access extra repayments you've made, but it's less flexible than an offset and some lenders restrict how often you can redraw.
If you're planning to turn the property into an investment later, keeping your loan balance as high as possible and using an offset for savings is usually the better structure for tax purposes. If you're planning to stay and pay the loan down quickly, unlimited extra repayments without fees is the feature to prioritise.
Most lenders let you switch loan features after settlement, but some charge fees or require a full refinance. Setting up the right structure from the start, even if you don't use all the features during construction, saves you time and cost later. A broker can map out what you'll need in 12 months and make sure the loan is built to suit that, not just the build phase. If you're thinking longer term about building wealth through property, the loan structure on your first home matters more than most buyers realise, and it's worth getting advice before you lock anything in. You can explore more about how home loans work for different goals and strategies on our site.
Call one of our team or book an appointment at a time that works for you. We'll walk through your budget, your timeline, and the lender options that actually suit house and land packages, not just standard purchases.
Frequently Asked Questions
Can I use the 5% deposit scheme for a house and land package?
Yes, the Australian Government 5% Deposit Scheme applies to house and land packages. The 5% deposit is calculated on the total contract price, including both land and construction costs. No lenders mortgage insurance is payable under the scheme.
Do I pay stamp duty on a house and land package?
Stamp duty applies to the land component of a house and land package. First home buyers in most states receive full or partial exemptions or concessions depending on the property value and location. In Queensland, a full duty concession with no price cap applies to new homes for eligible first home buyers.
When do I start paying interest on a construction loan?
You start paying interest once the land settles, even if construction hasn't started. During the build, you only pay interest on the amount drawn down at each stage. Once construction is complete, the loan converts to principal and interest repayments.
How long does it take to build a house after land settlement?
Construction typically takes 10 to 12 months after land settlement, but delays due to weather, materials or labour can extend the timeline. You'll continue paying interest on the land loan during any delays, so it's worth budgeting for a longer timeframe than the builder estimates.
Can I get a first home owner grant for a house and land package?
Yes, first home owner grants apply to house and land packages in all states because they're classified as new builds. Grant amounts range from $10,000 to $50,000 depending on your state, and some states have removed price caps entirely for new home purchases.
