House and land packages refer to a package deal that lets you purchase a new house with the land and build your dream home the way you want it. There are plenty of benefits to this option, which we won’t cover in this article, but we’ll explore how you can finance your House and Land package below.
It Pays To Shop Around
By using a broker or a comparison site, you can find the best rates and terms by shopping around. One thing to note, is that financing a home and land package isn’t too difficult, but it’s different from a typical home loan.
There are two stages to a House and Land Package loan – the land is purchased with one loan and the house is built with another. Both loans can typically be taken from the same lender as part of a bundle.
1. Buying the land – The land is bought first with a simple mortgage registered against the title of the land.
2. Construction loan – You also need finance to build your house. A construction loan allows you to draw down money at major stages of the building process. It is usually an interest only home loan during the construction period, which means you only pay interest on the amount that has been drawn down.
Once construction is finished, it is possible to combine both the loans for a single loan with an interest rate.
Home and Construction Loan Deposit
If you’re applying for two loans, it’s important that you have the deposit available for both upfront. Some lenders also offer low deposit and no deposit loans (for construction) in special cases.
You can take out a bond if you don’t have cash on hand. A deposit bond is a temporary substitute for cash deposit between signing of the contract and settlement. Many banks recommend taking deposit bonds to simplify your purchase.
Make sure to inquire about what is included in the build. The quoted price may or may not include items such as fencing, lawns, landscaping, finishes, carpeting or extras.
Many lenders release funds for construction only when they are sure that you’ve already paid off the earlier invoices, so make sure you stay up to date with your payments.
Additional Benefits or Grants
Naturally, you may want to save some money if you’re considering a package of houses and land. As stamp duty is applicable only on established homes, you don’t need to pay any for your new house. Also, research into your state’s legislation, as many states are offering First Home Owners’ Grant, especially for buying or building new houses. They typically qualify for houses in the low-mid $500k mark, so they are suitable for many options on our site. At the end of the day, you may need much less savings or deposit to purchase your house and land package than you previously thought.
Self-Managed Super Fund Options
Buying a house and land package can be a good deal for SMSF investors. If you have an SMSF, you can borrow money to purchase a house and land package if the entire transaction is carried out as a single property, comprising a vacant land with a completed house on it.
Note, that if you wish to buy the land first and build on it later, borrowing may not be allowed. This is because of legislation that does not allow for improvements on the acquirable asset (the house) unless the loan is outstanding.
Are you waiting to own your dream house? A house and land package lets you build the house of your dreams. Whether you are looking to buy your first home, invest or refinance, our team of advisors can help you with financial and package advice and guide you smoothly with your home loan process.