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Your guide to house and land packages

By ,| 5 min read

With the property market remaining hot and housing affordability worsening across Australia, it can feel like a difficult time for those wanting to buy a home.

House and land packages can be an attractive option for prospective buyers wanting to crack into the housing market.

If you’re thinking about bundling your land and house purchase together, there are some important things to consider first.

In this article, we explain what house and land packages are and how they work, including how they’re financed. We then discuss the benefits and risks, as well as explain the difference between buying a house and land package and buying off the plan.

What is a house and land package?

A house and land package is when the purchase of a block of land and a house is bundled into one process, but with two contracts.

These are usually available because property developers buy large areas of land and sell portions of this land as packages to home buyers.

There are two types of house and land packages:

  • Standard house and land package: includes the land which you’ll then build a house on later
  • Turnkey package: includes the land with an already-finished house – where you can ‘turn the key’ in the door immediately.

How does the process work?

The process of buying a house and land package will vary depending on whether you choose a turnkey or a standard package. Generally, the process looks like this:

1. Do your research and choose a developer

Before you can secure your dream home, you’ll need to do plenty of research first.

This will likely start with research into the area you want to live. You might think about whether the land being developed has suitable access to amenities, schools, shops, and public transport, for example.

The research stage will also involve deciding between a turnkey or standard package. With both of these options, you’ll have to carefully consider the features you want in a home.

A good way to do this is to visit the developer’s display homes. Make sure you check with the builder about what elements of the display home are included in the package you might buy, as well as what features are customisable.

This way, you won’t find out down the road that stone benchtops are an additional cost, for example.

It’s also a good idea to look into the builder you plan on choosing, including their qualifications and experience. This might mean looking at their previous builds and checking they are licensed, insured and have positive reviews.

2. Check over the contracts

Once you’ve decided on the package and builder you want to go with, it’s usually worthwhile having a professional review the contract. This is typically done by a solicitor or conveyancer.

Checking over the contract can reveal any hidden costs or clauses and will also outline the estimated build time as well as the building plans and specifications.

3. Arrange financing

The way you finance your house and land package will depend on whether you choose a standard or a turnkey package.

For a turnkey package, the process is the same as getting a home loan for an established property. You’ll typically need a deposit of 20% to avoid paying Lenders Mortgage Insurance (LMI). You can also get home loan pre-approval for turnkey packages, much like a regular home loan.

If you decide to go with a standard house and land package, you’ll require two loans: a land loan and a construction loan.

This is because you’ll buy the land first, and build on it later. These loans can be arranged separately but they’re commonly bundled together.

A land loan works like a regular mortgage, however a construction loan works a bit differently. The construction of your home will be broken up into stages and the construction loan is paid in instalments at the end of each stage.

These payments will be interest only until the building is complete, and at this time you’ll start paying back the principal amount too.

You’ll begin paying back the land loan once you’ve been transferred ownership of the land after settlement. You’ll also only need to pay stamp duty on the land portion of the package.

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4. Keep up with the building progress

After building commences, you’ll be able to continue checking on your home to make sure everything is going to plan. Keeping an eye on how things are going can ensure any problems that might come up are dealt with quickly.

5. Sign off on any remaining documents and move in

There will be a few more legal documents to sign once your home is complete, but as soon as these are signed and settlement takes place, you can move into your new home.

What are the benefits and drawbacks of house and land packages?

As with any property purchase, house and land packages have their pros and cons. Here are some you may want to consider before taking the plunge:

Benefits

  • Save on stamp duty: because you only pay stamp duty on the vacant block of land you buy, not the finished house, you could potentially save thousands of dollars
  • Time-saving: since the house is already designed for you, buying a house and land package rather than building yourself can save you time, meaning you can move into your home quicker
  • Convenient and simple: having your house and land streamlined into one purchase can make the home buying process more simple and convenient
  • Potential to save with government first home buyer grants: house and land packages are eligible under some government first home buyer schemes, like the First Home Owners Grant and the First Home Guarantee.

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Drawbacks

  • Not much room for customisation: while you may be able to make some alterations and design choices before building commences, house and land packages generally follow a pre-established design
  • You could potentially pay more than if you bought land and built on it separately: building a home as part of a house and land package can end up being more expensive than simply buying the land and building a dwelling on it. This is because there may be more fees included in your package contract
  • The development might not be in your ideal location: developments where house and land packages are located are typically on the outskirts of cities and towns, which may be further from infrastructure and amenities
  • It may not be the best investment decision: if you’re buying a house and land package to turn into an investment property, you could find it difficult to grow the value of your property or find tenants due to its location.

What’s the difference between a house and land package and off the plan?

If you’re considering purchasing a property, you may have wondered what the difference is between buying a house and land package and buying a property off the plan.

The difference is pretty simple – when you buy a house and land package, you own the land right from the get go, whereas when you purchase off the plan, you don’t own anything until settlement day.

Read about the risks and benefits of buying off the plan to learn more.

If you have questions about financing your house and land package, our friendly Home Loan Specialists are here to help. Book an appointment at a time that suits you.

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

Tags: property, home loan, stamp duty, off the plan, construction loan, first home buyer, first home, first home owners grant

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