Unlock the secrets to House and Land Package Loans

House and land packages let you buy land and build a home under one contract, often with builder incentives and grants you can't access when buying an established property.

The difference between what you can claim and what you end up paying often comes down to how you structure your home loan and when you access government support.

Why House and Land Packages Appeal to First Home Buyers

You pay stamp duty on the land value alone, not the combined value of land plus construction. In most states, you'll also receive the First Home Owner Grant because the home is brand new. Depending on where you're buying, that grant sits between $10,000 and $50,000.

Consider a buyer purchasing a house and land package in regional South Australia. The land is valued at $180,000 and the build contract is $320,000. Stamp duty applies only to the $180,000 land component and, under current South Australian rules, no transfer duty is charged on new homes regardless of price. The buyer also receives the $15,000 First Home Owner Grant. An equivalent established home at $500,000 would attract full stamp duty and no grant.

The ability to choose finishes, lock in a fixed build price, and delay some payments until construction milestones are reached makes these packages appealing when budgets are tight.

How Lenders Treat Construction and Land Separately

Most lenders split your loan into two parts: one for the land and one for the build. The land portion settles when you take ownership of the block. The construction portion is drawn down progressively as the builder completes each stage.

You'll typically start making repayments on the land loan as soon as it settles, even if construction hasn't begun. Interest on the construction loan is usually charged on the amount drawn so far, not the full amount approved. Some lenders offer interest-only repayments during construction, which can reduce your monthly cost while the house is being built.

If you're using the Australian Government 5% Deposit Scheme, the guarantee applies to the combined value of land and construction. The deposit percentage is calculated on the total package price, not just the land. You'll need to apply through a participating lender, and that lender will manage both the land and construction loans under the one approval.

Deposit Requirements and Lenders Mortgage Insurance

With a construction loan, lenders assess your deposit against the total contract price. A 5% deposit on a $500,000 house and land package means you need $25,000 in genuine savings or eligible gift funds.

Under the 5% Deposit Scheme, no Lenders Mortgage Insurance is payable because Housing Australia guarantees the shortfall between your deposit and 20%. Outside that scheme, a deposit below 20% will usually trigger LMI, and the premium is calculated on the full loan amount including construction.

Some lenders allow you to capitalise the LMI premium into the loan, which means you don't pay it upfront but you do pay interest on it for the life of the loan. That can add several thousand dollars to your total borrowing cost, so it's worth understanding how the premium is calculated and whether your deposit level pushes you into a higher LMI bracket.

Using First Home Owner Grants to Reduce Your Deposit Gap

The First Home Owner Grant can be applied for prior to settlement but is usually only paid when the slab is poured, depending on the state and your lender's requirements.

If you're buying in the Northern Territory under the HomeGrown Territory Grant, you could receive $50,000 for a new build on a contract signed before 30 September 2027. That grant can reduce the amount you need to borrow or allow you to retain more cash for furnishings and other settlement costs.

In Western Australia, the First Home Owner Grant of $10,000 applies to new homes valued under $800,000 south of the 26th parallel and under $1,000,000 to the north.

Interest Rate Options During and After Construction

Most lenders offer a variable interest rate during the construction phase and give you the option to fix once the build is complete. Some allow you to lock in a fixed interest rate on the land loan immediately and leave the construction loan variable until drawdown is finished.

If you fix the rate too early, you may be locked in for a period that doesn't align with your construction timeline. If the build is delayed and you're already on a fixed rate, you're paying that rate on a loan you haven't fully drawn. If rates drop during construction and you've fixed, you won't benefit from the reduction unless you break the fixed term and pay break costs.

A variable interest rate gives you flexibility while the loan is being drawn down. Once construction is complete and the loan is fully advanced, you can split the loan between fixed and variable or move entirely to one rate type depending on your circumstances at that time. Many lenders also offer an offset account on the variable portion, which can reduce the interest you pay if you're holding surplus cash during or after the build.

What Happens If the Build Is Delayed

Delays in construction are common. Supply chain issues, weather, and builder scheduling can push your completion date back by months. During that time, you're making repayments on the land loan and potentially on the portion of the construction loan that's already been drawn.

If your fixed rate is due to expire before the build is finished, you may need to extend or refix at a different rate. Some lenders will allow a rate extension, others will revert you to a variable rate, and you'll need to reapply to fix once the loan is fully drawn.

How Stamp Duty Concessions Apply to Land and Construction

Stamp duty is charged on the land component at settlement. The construction value is not subject to stamp duty, which is one of the main cost advantages of a house and land package over an established home.

In New South Wales, the full transfer duty exemption applies to land valued up to $350,000, with a sliding concession up to $450,000. If your land is worth $300,000 and your build is $400,000, you pay no stamp duty on the land and no duty on the construction.

In Victoria, the stamp duty exemption applies to properties up to $600,000 and phases out to $750,000. Because duty is calculated on the land value for a house and land package, you'll often qualify for the full exemption even when the total package price is higher. The Off-the-plan Concession, which calculates duty on land value at contract date only, applies to strata and community title contracts signed on or before 31 October 2026 but generally not to house and land packages in standard subdivisions.

The Australian Capital Territory removed the property value limit and income threshold for its Home Buyer Concession Scheme from 1 July 2026. Eligible buyers now receive full conveyance duty exemption on any property value, which makes Canberra one of the most generous jurisdictions for first home buyers purchasing land to build.

Combining the 5% Deposit Scheme with State Grants and Concessions

You can use the Australian Government 5% Deposit Scheme alongside state and territory first home owner grants and stamp duty concessions. You cannot combine it with Help to Buy, which is a separate scheme where the government takes an equity share in your property.

Under the 5% Deposit Scheme, property price caps vary by location. In Sydney the cap is $1,500,000, in Melbourne $950,000, in Brisbane $1,000,000. Regional caps are generally lower. If your house and land package exceeds the cap for your area, you won't be eligible for the scheme and will need to provide a larger deposit or pay Lenders Mortgage Insurance.

In regional areas, the Regional First Home Buyer Guarantee was replaced by the broader 5% Deposit Scheme from 1 October 2025, which removed the annual place limits and income caps that previously applied. If you're buying in a regional centre, check the applicable price cap for that location before signing a contract.

The question most first home buyers ask is whether to buy land first and build later, or sign a package contract upfront. Signing a package contract locks in your build price and starts the clock on grant and concession eligibility, but it also commits you to a builder and a timeline. Buying land separately gives you flexibility but delays access to the First Home Owner Grant until you enter a building contract, and the grant is paid at different stages depending on the state. In our experience, buyers who want cost certainty and immediate access to grants tend to choose package contracts, while those who want time to compare builders or modify plans prefer to purchase land first and contract separately later.