Getting a loan for vacant land
There are many reasons why people buy vacant land. Perhaps they intend to build a dream home, or a weekend getaway. Sometimes, particularly in rural areas, it could be a matter of wanting to extend an existing property.
If you want to purchase the land now, then wait and save further until you’re ready to build, you can do this too. It’s a relatively common scenario that lenders are used to, because it helps some people to better manage their finances.
Land loans – what are the options?
A ‘vacant land loan’ from a bank or lender is used to purchase a block of land, and it secures the loan for the land only. However, if you intend to build then you can also apply at the same time for a loan that includes your estimated construction costs, or you can add a construction loan on later. If you borrow for the land and home together, then there are usually criteria that set a deadline for when you need to begin construction.
Building on your land
Construction loans are generally paid out in stages, and they are different from ‘land only’ loans in that they are specifically tailored loans for building. This includes new construction, renovations, or a knock-down and rebuild.
‘Home and Land’ packages
In some areas, like the growing outer regions of Sydney, home and land packages are becoming popular. People buy into a newly developed suburban area where a developer has laid down infrastructure and is offering homes and land together in a bundled price, usually offering a range of home styles and floor plans you can choose from.
Sometimes these are called ‘buy-off-the-plan’ properties or ‘turnkey’ properties, meaning that when they’re complete, they’re ready to move into. The difference between these properties and building your own is that usually a developer will include things like land scaping and fencing and a driveway. When you construct your own home, a builder is usually contracted to complete only the dwelling/s – inside out, and then the homeowner independently organises other trades to complete the surroundings.
Land and construction loans or traditional mortgage loans are available, depending on what you need, and how the developer wants to be paid.
Criteria for applying
Securing a land loan, or a land and construction loan, is no different from securing any other kind of loan. The amount of land you want to buy, its value, your deposit, credit rating, interest rate and your earning power, as well as your ability to meet the repayments will all be considered in your application and will determine how much you can borrow.
Typically, you will require a 5-10% deposit and you will have the choice of fixed or variable interest rates. Finding the right loan for your personal circumstances is often easier through a mortgage broker, as they know all the credit providers so call us and we can do the research and find the most appropriate loan for you.