House and land packages are one of the most convenient and affordable ways to get a foothold on the property ladder. Unlike buying an established home though, the process of securing finance when buying a house and land package is slightly different. With this in mind, we’ve set out some key points to help you understand just how it all works and what you’ll need to provide to your lender…
LET’S BREAK DOWN THE PROCESS
– Buying a house and land package requires securing two loans – one for the house and one for the land. While, as with any mortgage, a deposit and borrowing power are essential, the lender will also need a valuation on the land and home structure in order to assess risk.
– It’s important to remember that the best way to maximise your chances of obtaining finance when buying a house and land package – especially if you don’t have the required deposit – is to use a broker. The key advantage of using a broker is that they are able to source a lender who understands your situation and is willing to provide a loan that suits your needs accordingly.
– The house and land process usually begins by settling on the land first and registering a mortgage on the title. Building commences when the second loan for construction is approved, with payments normally drawn down in stages (meaning you only pay interest on the money as it is used!). You will be required to approve invoices and costs provided by the home-builder before any payments are made by the lender. Upon completion of construction, there will be no remaining payments due from your lender and the full mortgage will now apply.
– In order to meet the terms of your financing agreement, you will often be required to build on the land within one to two years. Speak to your broker and solicitor to ensure you are fully informed of your loan obligations and the building timelines specified within the contracts.
CONSIDER A DEPOSIT BOND
If you are unable to provide the full deposit amount upfront when applying for finance, it may be worthwhile to consider a deposit bond. A deposit bond acts as a provisional substitute, allowing you to buy into a house and land package even if you do not yet have the necessary funds. It’s important to note that a deposit bond does not replace a deposit, as you will eventually need to pay.
You’ll need to provide your lender with the following:
- Quote or building contract, including the drawdown schedule recommended by the home-builder.
- Builder’s details, including licence and insurance: Always check that your project is covered under Home Warranty Insurance (HWI) or your state’s equivalent.
- Council approved plans: Drawings of the approved proposed works are required for the bank to ascertain the completed value of your property.
- Quotes for any other planned works: Provide quotes for any landscaping, sheds, pools or other work that will not be completed by the home-builder.
Thinking of buying a house and land package? On iBuildNew you can shortlist and compare house and land packages and also land estates side-by-side! Explore our developers and builders page to find out important information about guidelines, masterplans and where to find display homes. Book a call with our team of new home advisors or call 1800 124 284 to get started today!
If you’re having trouble financing, download our FREE guide to get a comprehensive overview of what you should expect and prepare for…
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