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House and Land Package Home Loan

Single Contract New Home Loan

Becoming more popular – among owner-occupiers and property investors – is the house and land package deal. As a new home buyer, when you enter into this type of agreement you reap a number of benefits.

For the Owner Occupier, these include:

  • A new home that has been best customised to your requirements (and budget).
  • If eligible, you may qualify for First Home Owner Discounts and Grants from various sources - e.g. FHOG, stamp duty reductions, etc
  • The end product is new and will have very low maintenance costs for about 6 to 10 years.

For Investors, these include:

  • The end product is a new, modern home built to your specifications with all the features that attract the best tenants. That will mean fewer vacant periods, a higher rent, and a higher return.
  • The property will be low maintenance, meaning costs of upkeep will be far lower in the early years: and that will have a positive impact on cash flow.
  • Stamp duty is only payable on the land, and in some states, there will be no stamp duty to pay. That means lower costs upfront and a quicker return on investment.

How Do House & Land Packages Work?

House and land packages work in one of two ways, with the investor either buying the land from the developer who then builds on it for the investor or with a different developer building the property.

When it comes to financing the package, there are two major ways that house and land package home loans work:

Proportional Payments Made As The Construction Progresses

With this type of house and land package, the borrower is able to structure payments to coincide with progress on the build.

The land is bought first, and repayments begin immediately. As construction milestones are hit on the house build, money is released to pay the developer/builder and the borrower begins to make payments on the financing.

The home loan grows as the home grows, and repayments on the financing grow, too. This is the most common type of house and land package loan, as risks are shared between developer and investor.

However, for the investor there will be financing payments to be made before any rental income is received. The same principle applies to the person who buys a house and land package as their new home: they will be paying out on rent and house and land financing before they get to move in.

Payment Made Once The Off-The-Plan Home Is Completed

This is most common with purchases that work like off-the-plan investments. The investor agrees to buy the house and land, but no money (except deposit) exchanges hands until the project is fully completed.

At this stage, the lender will undertake valuations for financing purposes and then extend the loan to the investor. The investor has no need to make progress payments as the house is built but will be reliant on the bank agreeing valuation.

This type of house and land package is less common because the developer/builder effectively takes the majority of the risk: it is the builder that pays all the building costs upfront.

To find out more about how you can benefit from house and land package home loans, contact RedCap Finance Brokers here.