What is a house and land package and how do they work?
For many buyers, house and land packages are the ideal way to get a new home with less effort and greater affordability. Like any type of property investment, house and land packages come with a unique set of considerations, so it’s important to do your research.
What are the different types of house and land packages?
There are generally two types of house and land packages to choose from.
The first is to buy your block of land and to build your chosen home. This type of package gives you more freedom to personalize the design, fixtures and colours of your home.
The second is to buy a ‘turn-key’ package. These homes have all the essentials you need to move in right away and may already be under construction.
What’s the process?
If you’ve purchased a vacant block with a plan to build later, you’ll usually have two contracts – one for your mortgage on the land, along with a construction loan to cover the cost of building.
A construction loan is typically set out in agreed stages, which means you’ll only pay interest on costs as they are incurred. Here’s an example:
- Stage one: Base
- Stage two: Frame
- Stage three: Lock-up
- Stage four: Fix
- Stage five: Handover
Meanwhile, if you’ve chosen a turn-key option, there will usually be one contract covering house and land, with a single price. Once finance is transferred to the property developer (i.e. Fairhaven), you’ll get the keys to your brand-new pad and can move in (or find tenants, if you’re an investor).
How about finance?
If you’re buying land first and building later, you can take out a traditional mortgage for the land and a separate construction loan to cover the cost of building.
As mentioned, construction loans are usually staggered, so you’ll only pay interest on finance as stages are complete – which makes the building process more affordable. In this scenario, you should consider getting pre-approval on both your land and construction loans at the same time. This gives you a better idea of how much you can afford to spend in total on your home.
When it comes to deposits, most developers require between five and ten percent of the total cost of your land to be paid upfront.
What are the benefits of house and land packages?
- House and land packages provide great value and often undercut the average home price in the major cities where they reside
- You’ll save money on stamp duty, which only applies to the land in house and land packages, as opposed to paying the full amount when purchasing established homes
- Fixed price turn-key packages give you all the costs upfront, so you know exactly what your expenses are
- Quality new homes should come with warranties and low maintenance costs for several years
- First home buyers can tap into a range of state government incentives pitched at building or buying a new home (more on that below)
Are there grants for first home buyers?
First home buyers interested in house and land packages may be able to take advantage of generous government grants. In Victoria, there is a First Home Owner Grant (FHOG) which offers different savings depending on whether you’re building in regional or metropolitan Victoria.
Check out the State Revenue Office website to find out more.
What else do I need to consider?
Ask for a detailed breakdown of what’s included as part of your house and land package to ensure you understand what you’re getting.
Standard inclusions in a new home usually include a fully fitted kitchen and bathroom, windows and doors, built-in robes, electrical points and heating. Meanwhile, other practical elements such as driveways, landscaping and fencing may not be included in the price you’ve been quoted – and these can significantly inflate your originally predicted costs.
Compare the standard inclusions of each house and land package you’re considering and remember that value isn’t just about price – it’s the sum of all that you’ll receive measured against the cost of purchasing.
Ask the builders you’re considering about their construction delay policies. Whilst a change in completion date is sometimes unavoidable, some builders handle this better than others. Find out how you’ll be kept informed of progress if your build runs over schedule. Choosing a builder with a robust and fair policy around this can make your experience significantly more enjoyable and less stressful.
Don’t forget to factor in other costs associated with buying property such as conveyancing and bank fees.
Where to now?
Arrange a chat with our new home consultants to discuss any questions you have about house and land packages – they’re full of great advice and ideas.
You can also browse our current house and land packages online. We have opportunities available in Melbourne’s North, East, South-East, Gippsland as well as in Geelong to suit different needs, styles and budgets.
The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Fairhaven Homes recommends that you consider whether it is appropriate for your circumstances and that you seek independent legal, financial, and taxation advice before acting on any information in this article.