What Are House and Land Package Home Loans in Australia?

What Makes a House and Land Package Different from Buying Established Property?

A house and land package is a single purchase where you buy a block of land and a building contract at the same time, usually from a developer or builder. The main difference is that your home loan is paid out in stages as construction progresses, not as a lump sum at settlement. Most lenders treat the land purchase and the building contract as two separate transactions even though you sign one sales agreement.

Consider a buyer purchasing a house and land package with a total contract price within the regional New South Wales cap under the Australian Government 5% Deposit Scheme. The lender will first settle the land component, usually within 60 to 90 days of signing the contract. At that point, you start paying principal and interest on the land portion only. Once the builder reaches each stage outlined in your building contract, such as base stage or frame stage, the lender releases another payment. You make interest-only repayments on the construction amount until the build is finished, then the loan switches to principal and interest across the full amount.

The deposit you need depends on whether you use a government scheme or conventional lending. Under the 5% Deposit Scheme, eligible buyers can proceed with a 5% deposit across the total package value without paying LMI. Outside that scheme, most lenders want at least 10% of the total package price, and anything under 20% usually means LMI applies. The combined land price and build cost determines your loan to value ratio, not just the land.

How Lenders Assess a House and Land Package Application

Lenders assess serviceability based on the full package price, not just the land value. Your income needs to support repayments on the entire loan amount, even though you only draw down progressively. The lender applies a serviceability buffer of at least 3.0 percentage points above the interest rate, which means you need to prove you can afford repayments at a rate higher than what you will actually pay.

Most lenders also require the land to be registered in your name before releasing construction funds. If the land is part of a larger subdivision that has not yet been titled, expect delays. Some developers offer turnkey packages where the land is already titled, which speeds up settlement. Others sell off-the-plan land that might not be ready for months. Your construction loan approval is conditional on the builder holding the right licences and insurances, and the lender will want to see a fixed-price building contract with stage payment terms clearly set out.

What Loan Features Work for House and Land Packages?

Most borrowers use a split between variable and fixed rate products during construction. The land component often sits on a variable rate with an offset account linked, so you can park savings and reduce interest while the build is happening. The construction drawdowns typically run on a separate interest-only variable loan until practical completion, then get consolidated into the main loan.

Fixed rates can lock in certainty once construction finishes, but locking a rate during the build means you are paying interest on a loan that has not fully drawn down yet. Some lenders allow you to fix after final draw, which gives you flexibility during the construction phase without committing too early. If you are using Help to Buy, the equity contribution from the government applies to the total package value, and you still need to arrange finance for your portion through a participating lender. Not all lenders on the Help to Buy panel are experienced with house and land packages, so check before applying.

How Debt-to-Income Limits Affect Package Buyers

The DTI lending limit that started in February this year applies to new lending from ADIs, which means most banks and credit unions. Each lender can approve up to 20 per cent of new owner-occupier loans to borrowers with a DTI ratio of six times gross income or more. If your package price pushes you above that threshold, some lenders may decline or ask for a bigger deposit.

In our experience, buyers stretching to a higher package price in growth corridors sometimes hit DTI limits even when they meet serviceability tests. A couple earning a combined income of $140,000 looking at a package close to $850,000 might find some lenders willing to proceed and others not, depending on how much of their lending allocation they have already used that quarter. Smaller ADIs and non-ADI lenders are not bound by the same limit, which can open up options if a major bank says no.

Off-the-Plan Unit Packages and Duty Concessions

Some house and land packages are structured as off-the-plan unit or townhouse purchases rather than detached dwellings. In the ACT, eligible buyers purchasing off-the-plan units pay no conveyance duty from July this year, with no property value cap. The buyer must occupy the property as their principal place of residence for at least one year starting within 12 months of completion.

Victoria offered an off-the-plan duty concession for strata contracts signed on or before 31 October last year, where duty was calculated only on the land value at contract date. That concession has now closed. Queensland and South Australia also provide duty relief on new builds, though the structure and caps vary. When you are comparing package costs across states, factor in the duty saving as part of your total outlay, not just the sticker price and the loan amount.

Using First Home Buyer Grants with Your Package Loan

If you qualify as a first home buyer, grants are available in every state and territory for new builds, though the amounts and caps differ. Queensland offers $15,000 for new homes under $750,000 for contracts signed from July this year. South Australia provides $15,000 with no price cap for eligible contracts from mid last year. The Northern Territory offers $50,000 under the HomeGrown Territory Grant for contracts signed by September next year.

The grant is usually paid at settlement of the land or at final completion, depending on the state and the contract structure. Your lender will ask for evidence that the grant is coming and may factor it into your deposit calculation. Some states, like New South Wales, also offer full duty exemptions on land valued up to $350,000 and new builds up to $800,000, which can save several thousand dollars. You can combine most state grants and duty concessions with the 5% Deposit Scheme, though Help to Buy has different rules depending on jurisdiction.

Call one of our team or book an appointment at a time that works for you to talk through which grants and schemes apply to your package and how the loan structure affects your settlement timeline and repayments.

Frequently Asked Questions