What is the Difference Between a Land Loan and Home Loan?

When purchasing land before a build you will generally have to pay a deposit of 10% of the purchase price, with the balance being payable on settlement – this way you pay stamp duty only on the land, rather than on the construction cost of the house.

When building on your existing land you will need two home loans – one for the land and one for the construction. Progress payments on the mortgage will need to be made at different stages of construction.

In cases where you’re buying a house and land package it’s not uncommon to buy the house already completed on the developer’s land. If you decide on this option, all you need to do is give a 5% deposit, with the rest being payable once the home is completed (so no progress payments).

Finding a reputable builder is important. You’ll want to ensure that they provide a ‘Fixed Cost’ build so you’re not left with any nasty surprises. You will also want to ensure they hold all the appropriate insurance and have a good record of maintaining their promised build timeline.

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