Quick tricks to fund a house and land package

Securing finance for a house and land package works differently from buying an established home

A house and land package isn't treated as a single purchase by lenders. You're financing two separate transactions: the land acquisition and the construction contract. This means your lender will release funds in stages rather than all at once, and you'll need approval that covers both components from the outset.

Consider a buyer who secures a house and land package in one of the newer developments near the Rivoli Cinemas precinct. They purchase the land for $850,000 and enter a building contract for $520,000. The lender approves the total loan amount of $1.23 million but only releases the land portion at settlement. The construction funding follows a separate drawdown schedule tied to building milestones, with the buyer paying interest only on funds already released until the home is complete.

How deposit requirements shift when you're buying land first

You'll need your full deposit available for the land component, not spread across the total package price. Lenders calculate your loan to value ratio based on the land value at purchase, then reassess once construction begins. If you're borrowing more than 80% of the land value, you'll pay Lenders Mortgage Insurance on that portion immediately, with a second LMI assessment possible once the construction value is added.

For Camberwell buyers looking at house and land options in growth corridors outside the area, this often means coming up with a larger upfront deposit than anticipated. A 10% deposit on a $1.37 million package sounds manageable at $137,000, but if the land is valued at $850,000, your deposit needs to cover 10% of that amount plus enough to keep your LVR within the lender's limits.

The construction loan structure determines your repayment approach during the build

During construction, most lenders offer interest only repayments on the funds already drawn down. You're not paying principal and interest on the full loan amount because you haven't received the full loan yet. Each time the builder reaches a milestone and your lender releases the next progress payment, your loan balance increases and so do your repayments.

A typical drawdown schedule includes five to six payments: land settlement, base stage, frame stage, lockup stage, fixing stage, and final completion. Your repayments step up at each stage. If you've drawn $850,000 for land and $104,000 for the base stage, you're paying interest on $954,000, not the full construction amount. This structure gives you time to manage cashflow during the build, but it also means your repayments aren't fixed until construction completes.

Pre-approval timing matters more than it does for established properties

House and land packages often require a longer settlement period for the land, followed by a construction period that can stretch six to twelve months. Your home loan pre-approval is typically valid for three to six months, which may not cover the full timeline from contract signing to completion. You'll need to factor in the possibility of reconfirming your approval partway through, particularly if your employment or financial situation changes during the build.

If you're working with a developer in a staged release, land titles may not be issued immediately. This delays your land settlement and can push your pre-approval expiry closer to the date you actually need the funds. Lenders will usually extend pre-approval if your circumstances haven't changed, but it's not automatic.

Offset accounts work differently during construction and after completion

Most construction loans allow you to link an offset account from the start, but the benefit only applies to the funds already drawn. If you've received $850,000 for land and you're holding $40,000 in your offset, you're reducing the interest charged on that portion. Once construction completes and the full loan amount is drawn, your offset works against the entire balance.

For Camberwell buyers who are selling an existing property to fund part of the package, timing the sale to coincide with construction completion can maximise offset benefits. Selling early and parking the proceeds in an offset account during the build reduces interest costs without requiring you to pay down the loan before you've moved in.

Variable versus fixed rates during construction and beyond

You can lock in a fixed interest rate during construction, but most lenders only start the fixed period once the loan is fully drawn. If you fix your rate at the start of construction, you might be on a variable rate for the first six to twelve months while the build progresses, then switch to fixed once complete. Some lenders allow you to lock in a rate in advance, but this usually comes with conditions around timing and rate movement.

A split loan structure often makes sense for house and land buyers. You might keep the land portion on a variable rate with an offset account to manage cashflow during construction, then fix the construction portion once it's drawn. This gives you flexibility while the loan balance is increasing, then stability once you're living in the property and managing a full repayment schedule.

Camberwell buyers often use house and land packages as an entry point outside the immediate area

Camberwell's established housing stock and proximity to Hartwell Station make it a tightly held market. House and land packages in growth areas offer a way to achieve home ownership without competing in Camberwell's auction market, particularly for buyers who want a new build with lower maintenance costs and modern inclusions.

The trade-off is location. You're moving further from the Camberwell Junction shopping precinct and the Rivoli in exchange for a new home at a lower entry price. Your finance structure needs to account for this, particularly if you're planning to rent the property initially or if you're buying as an investment loan while continuing to rent closer to Camberwell.

Progress payments require builder verification before funds are released

Your lender won't release construction funds based solely on the builder's invoice. They'll send a valuer or building inspector to confirm the stage is complete before approving the drawdown. This adds time between the builder's request for payment and the funds hitting their account, which is why most building contracts include a buffer period for finance approval at each stage.

If the valuer identifies incomplete work or variations from the approved plans, the lender may hold back part of the progress payment until the issue is resolved. This can create tension between you and the builder, particularly if the builder is waiting for payment to continue work. It's worth understanding your building contract's payment terms and making sure they align with your lender's drawdown process.

Call one of our team or book an appointment at a time that works for you

Funding a house and land package involves coordinating land settlement, construction drawdowns, and repayment structures across a timeline that can stretch well over a year. If you're weighing up a house and land option or you've already signed a contract and need clarity on your next steps, call Plavin Finance or book an appointment to talk through your specific situation.

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