The easiest way to finance a house and land package

Why House and Land Packages Work for First Home Buyers

A house and land package lets you purchase land and construction in a single transaction, often with lower upfront costs than an established home. You secure a block, choose a builder, and the home gets constructed after settlement on the land. Because it qualifies as a new build, you can access the $10,000 Victorian First Home Owner Grant and full stamp duty exemptions on properties up to $600,000, with concessions extending to $750,000. Those two benefits alone can save you tens of thousands compared to buying an established property.

The structure also means you will not pay lenders mortgage insurance under the Australian Government 5% Deposit Scheme if you meet the eligibility criteria, even with just a 5% deposit. That removes one of the largest single costs buyers with smaller deposits usually face.

What Lenders Look for When You Apply for a Home Loan on a House and Land Package

Lenders treat house and land packages as construction loans, not standard home purchases. You need approval for both the land portion and the building portion. Most lenders will require a valuation of the land at contract price and a second valuation of the completed home based on the builder's plans and specifications. Some lenders will ask for detailed construction timelines and proof that your builder is registered and insured.

Your deposit is calculated on the total contract price, which is the land price plus the building price. If you are using the 5% Deposit Scheme, you need 5% of that combined figure. Consider a buyer purchasing a $550,000 package in Clyde North, split between $200,000 for land and $350,000 for the build. The deposit requirement would be $27,500, plus costs for stamp duty on the land portion if applicable, legal fees, and other settlement expenses. Because the build is new, the full stamp duty exemption would apply, saving around $21,000 compared to an established home at the same price.

Fixed or Variable Interest Rates on Construction Loans

Most lenders will start your loan on a variable interest rate during the construction phase. Interest is charged only on the land component until the building work begins, then on progressive draw-downs as the builder completes each stage. Once construction finishes and you settle on the completed home, you can switch to a fixed interest rate if that suits your circumstances.

Some lenders allow you to lock in a fixed rate at the start, but it will apply to the full loan amount from day one, even if the house is not yet built. That can mean paying interest on funds you have not yet drawn down, which rarely makes financial sense. In our experience, starting variable and switching to fixed after completion gives you more control and lower costs during construction.

How Deposit Sources Work for First Home Buyers

You can use genuine savings, gifted funds from immediate family, or a combination of both. Lenders define genuine savings as money held in your accounts for at least three months. If a parent or sibling gifts you part of your deposit, most lenders will ask for a signed declaration confirming the funds are a gift, not a loan.

The First Home Super Saver Scheme is another option. You can make voluntary superannuation contributions and withdraw up to $50,000 per person to put toward your deposit. The withdrawn amount is taxed at your marginal rate, but because super contributions are taxed at 15%, you often come out ahead. If you have been salary sacrificing into super for a couple of years, this can add several thousand dollars to your deposit without requiring additional cash savings.

Timing Your Loan Application Around Construction Milestones

You will settle on the land first, usually within 60 to 90 days of signing the contract. The builder then starts work, and you draw down funds progressively as each stage is completed. Typical stages include base, frame, lockup, fixing, and completion. Each draw-down is triggered by an inspection report from the lender's valuer or building inspector.

If you are relying on pre-approval to secure your finance, make sure it is valid for at least six months and ideally covers the full construction period. Some lenders issue pre-approvals for just 90 days, which can create problems if construction is delayed. Ask your broker to confirm the validity period and whether the lender will reassess your circumstances when you draw down construction funds.

What Happens If Construction Takes Longer Than Expected

Delays happen. Wet weather, material shortages, and builder scheduling issues can push your completion date out by months. Most lenders will extend your loan approval if you notify them in advance and your financial situation has not changed. If your income or employment status changes during construction, the lender may reassess your application, which can create complications.

One buyer we worked with in Werribee signed a contract in mid-2025 for a $620,000 package. Construction was meant to finish in eight months, but permitting delays and wet winter weather pushed completion to 13 months. The lender extended the approval without issue because the buyer's income had increased and they had continued saving during the delay. The loan settled on the completed home without additional paperwork, and the buyer moved in three weeks after final inspection.

Stamp Duty and Grant Eligibility in Victoria

The $10,000 First Home Owner Grant applies only if the total contract value is $750,000 or less and the property is newly built. Stamp duty concessions apply separately and are not capped by the grant limit. If your package is valued at $600,000 or under, you pay no stamp duty. Between $600,001 and $750,000, a sliding concession applies. Above $750,000, you pay full stamp duty rates.

Most house and land packages in growth areas like Clyde, Tarneit, Wyndham Vale, Donnybrook, and Mickleham sit comfortably under the $750,000 threshold, which makes them particularly attractive for first home buyers trying to stretch their deposit and maximise available concessions. Land closer to the CBD or in established suburbs like Doncaster or Glen Waverley will push you over the cap, meaning no grant and reduced or no stamp duty relief.

Using the 5% Deposit Scheme Without Paying Lenders Mortgage Insurance

The 5% Deposit Scheme replaced the older First Home Loan Deposit Scheme in October 2025 and removed all income caps and annual place limits. You can now apply at any time through one of 31 participating lenders, including three major banks and 28 non-major lenders. Housing Australia guarantees the difference between your 5% deposit and 20% of the property value, which means no lenders mortgage insurance is charged.

The property price cap in Melbourne is $950,000. Regional Victoria has a separate cap, which is lower but still covers most house and land packages in regional growth areas. You cannot use the scheme for investment properties, and you must move into the home as your principal place of residence within 12 months of settlement.

How Offset Accounts and Redraw Work During Construction

Most construction loans do not offer offset accounts during the building phase. Once the home is complete and you switch to your ongoing home loan product, you can add an offset account if your lender and loan type support it. An offset account reduces the interest you pay by offsetting your savings balance against your loan balance. If you have $20,000 in your offset and owe $500,000 on your mortgage, you only pay interest on $480,000.

Redraw works differently. If you make extra repayments on your loan, redraw lets you access those funds again if needed. Some lenders restrict redraw during construction, so check the terms before assuming you can pull money back out. Variable interest rate loans almost always include redraw, but not all include offset. Fixed interest rate loans rarely offer either.

When to Speak to a Broker Instead of Going Direct to a Lender

Construction loans involve more moving parts than standard home loans. A broker who works regularly with first home buyers purchasing house and land packages will know which lenders process construction applications quickly, which ones offer the most flexibility on draw-down schedules, and which ones have the highest approval rates for buyers using gifted deposits or the 5% Deposit Scheme.

Going direct to your bank might feel familiar, but most bank staff are generalists. They process applications, but they do not compare products across lenders or structure your application to improve your chances of approval. If your situation involves anything outside the standard payslip-and-savings scenario, a broker will usually get you a better outcome in less time.

Call one of our team or book an appointment at a time that works for you. We will walk you through your deposit options, confirm your eligibility for grants and concessions, and get your loan application moving while your chosen land block is still available.

Frequently Asked Questions