What is a house and land package?

If you love the idea of a brand-new home built from scratch – you’ll likely find yourself looking for a house and land package. The package is essentially a deal where you buy both land and the construction of a newly built home in one streamlined process. House and land packages are common in new estates with developers offering prospective buyers varying land sizes as well as different home designs to pick and choose from.

What’s included in the costs?

A house and land package is usually split into two contracts: 

  1. The land purchase: You buy the land first, just like any real estate purchase. 
  2. The building contract: You enter into a separate agreement with the builder to construct your home. 

The overall cost will generally cover:

  • The land itself
  • Construction of the house
  • Basic landscaping
  • Driveways and fencing (depending on the builder)

Tip: Not all packages are fully turnkey (ready to move in), so it’s always a good idea to check what’s included and what you need to pay extra for.

Advantages and disadvantages of a house and land package

Advantages

  • Reduced stamp duty: Since you’re only buying the land first, you typically pay stamp duty on the land and not the completed house. This can save you thousands of dollars compared to buying an established home.

  • Fixed price: The pricing of the package (house and construction) is usually bundled up into one, so you have clarity on the total expenses from the start.

  • Potential for equity growth: If you buy in an up-and-coming area, your property value may increase before you even move in, giving you instant equity.

  • Low maintenance: Since everything is brand new, you may also not have to worry about the cost of repairs and renovations for some time. New builds also typically come with warranties for added peace of mind.

  • Customisation options: When you buy a house and land package, you’re usually selecting from pre-designed home options, however many builders do offer customisations like choosing floor plans, finishes and upgrades to match your style and budget.

  • First home buyer incentives: If you’re a first home buyer, you may qualify for government grants like a First Home Owner Grant (FHOG) or the First Home Guarantee scheme. This could help you get into a new house faster, with less money required upfront for a deposit and helping you get on the property ladder sooner.

Disadvantages

  • Limited location choices: House and land packages are usually part of new housing estates located on the outskirts of cities, which gives you fewer choices when it comes to location.

  • Less established infrastructure: It takes time for new neighbourhoods to grow, and new estates may lack established infrastructure like schools, shopping centres and public transport early on. While these developments often have great long-term potential, they may initially lack some conveniences.

  • Construction delays: Bad weather, supply chain issues or builder delays could set back your home build timeline. If you’re renting while waiting for your home to be completed, this can mean extra costs and uncertainty.

  • Unexpected costs: Most packages advertise a fixed price, but there may be costs that aren’t included. These hidden costs can cover site preparation, upgrades to standard fittings and finishes, council approvals and permits, landscaping or fencing.

  • Market risks: Property values tend to fluctuate and buying in a brand-new estate carries risk if the area doesn’t develop as expected. If there’s an oversupply of similar homes, for instance, property prices may stay the same or even drop in the short term.

How to finance your house and land package

Financing a house and land package is slightly different to a standard home loan. Since you’re purchasing both land and construction services, the loan tends to be split into two parts.

  1. A loan for the land: This is the standard mortgage that covers the cost of the land alone. The lender provides the funds, and you start making repayments as soon as settlement occurs. 
  2. A construction loan: With a construction loan, the bank releases funds in stages, also known as progress payments. This means you draw down an agreed amount as payment for each stage, as your home is built. During construction, most lenders require interest-only repayments on the loan amount drawn, keeping your costs lower while the home is being built. Once construction completes, the loan converts into a regular home loan, where you start making principal and interest repayments.

Before you start shopping for a house and land package, it can be worth applying for pre-approval for a loan. This will give you a clear indication of your borrowing capacity, helping you set a budget.

Key financial considerations

Deposit requirements

You’ll need a deposit for both the land and the construction loans. Generally, you’ll need to aim for a 20% deposit to avoid lenders mortgage insurance (LMI), unless you qualify for a government grant or scheme.

Lender policies

Lender policies tend to vary a lot especially with construction loans. It’s worth checking with your lender to see if they’ll support you for your house and land purchase.

Government grants

First home buyers may be eligible for the FHOG, stamp duty concessions or low-deposit schemes, which can lower upfront costs.

Extra costs

Costs like registration fees, landscaping, upgrades to standard inclusions and stamp duty are unlikely to be included in your package. There will also be upfront and ongoing costs to factor in, such as a solicitor to check contracts.

Next steps

A house and land package can be a cost-effective and stress-free way to buy a new home –especially with benefits like reduced stamp duty, customisation options and lower maintenance costs. But it’s crucial to weigh up your loan requirements, hidden costs and market conditions before committing to the purchase. Always choose a lender that meets you needs and make sure you’re financially prepared for the journey. When you’re ready, our home loan experts are here to support you every step of the way.

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Terms and Conditions

The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.

Target Market Determinations for these products are available at nab.com.au/TMD.