Do You Know What a House & Land Package Actually Costs?

A house and land package means you are buying vacant land and a construction contract at the same time, usually from a developer.

That might sound straightforward, but your lender treats it like a construction loan, not a standard home purchase. You will go through two separate valuations, two settlements, and your deposit gets released in stages as the build progresses. Most first home buyers in Morningside expect the process to mirror buying an established home, but it does not. Understanding how the finance works before you sign anything can save you from surprises later.

How Does Financing a House and Land Package Differ From Buying an Established Home?

You settle on the land first, then the lender releases funds progressively as the builder hits specific milestones during construction. The land is valued separately from the finished home, and your loan does not fully draw down until the house is complete. You will typically pay interest on the land component while the house is being built, either from your own cash flow or by capitalising it into the loan.

Consider a buyer purchasing a house and land package in nearby Cannon Hill. The land settles at $320,000, but the total package including the build is $680,000. The buyer needs enough deposit to cover the land settlement first, and then the lender releases construction funds in stages as the slab is poured, the frame goes up, and so on. During the 10-month build, the buyer pays interest only on the land loan, which is around $1,200 per month. Once the house is finished and they receive the occupancy certificate, the loan converts to principal and interest repayments on the full amount.

Can First Home Buyers Use the First Home Guarantee for a House and Land Package?

Yes. The First Home Guarantee lets eligible buyers purchase with a 5% deposit without paying Lenders Mortgage Insurance (LMI), and it applies to house and land packages as long as the total value stays under the relevant cap. For Queensland, that cap is $750,000 for regional areas and $650,000 in Brisbane. Since the First Home Guarantee expanded in October 2025, there are no income limits, which opens it up to more buyers.

Your lender will still assess your borrowing capacity based on the full package price, and you need to show you can service the loan once construction is complete. The 5% deposit applies to the total contract value, not just the land. So if the package is $650,000, your deposit is $32,500, but you will need to cover stamp duty and other costs on top of that.

What Grants and Concessions Apply in Queensland?

Eligible first home buyers in Queensland can access up to $30,000 under the state's First Home Owner Grant for new homes valued under $750,000, and this stacks with the First Home Guarantee. The grant expires on 30 June 2026, so if you are signing a contract now, check whether it has been extended or replaced. You also pay no stamp duty on new homes from 1 May 2025 if eligible, which can save you thousands compared to buying an established property.

Morningside sits within the Brisbane local government area, so the Brisbane cap of $650,000 applies if you are using the First Home Guarantee. Many house and land packages in nearby growth areas like Coorparoo or Cannon Hill are priced within that range, but it is worth running the numbers early to confirm eligibility.

How Do Lenders Value a House and Land Package?

The lender orders a valuation on the land as vacant, and a second valuation on the completed home once construction finishes. The land valuation determines how much they will lend at settlement, and the final valuation confirms the property is worth what you agreed to pay. If the final valuation comes in lower than the contract price, you may need to bring additional funds to settlement or renegotiate with the builder.

In a scenario where a buyer signs a $680,000 contract but the completed home values at $660,000, the lender will only advance funds based on the lower figure. That means the buyer needs to find the $20,000 shortfall themselves. This is rare with reputable builders in established estates, but it is a risk worth understanding before you commit.

What Happens to Your Deposit During Construction?

Your deposit is usually held in a trust account and released to the builder as construction progresses. The exact timing depends on your contract, but typically a portion is released at slab stage, another portion at frame stage, and the remainder at practical completion. The lender matches these progress payments by releasing funds from your loan at the same milestones.

You do not move into the property until construction is finished and the occupancy certificate is issued, so you will need to continue renting or living elsewhere during the build. That can stretch your budget if the build takes longer than expected, which is why having a buffer in your borrowing capacity is important.

How Do Interest Payments Work During Construction?

Most lenders charge interest only on the funds that have been drawn down. So if the land settles at $320,000 and you have drawn that amount, you pay interest on $320,000 until the next progress payment. As each stage is completed and more funds are released, your interest payment increases. Some lenders let you capitalise the interest during construction, meaning it gets added to your loan balance rather than paid out of pocket.

Capitalising interest can help if your cash flow is tight, but it increases the total amount you owe once the house is finished. If you are already borrowing close to your limit, it can push you over your approved loan amount, so discuss this with your broker during pre-approval.

What Documents Do You Need for a House and Land Package Loan?

Your lender will ask for the land contract, the building contract, the council-approved plans, and a copy of the Home Warranty Insurance from the builder. They also want to see your employment details, savings history, and any other debts or commitments. If you are using the First Home Guarantee, you will need to meet the eligibility criteria and provide evidence that you have not owned property before.

Some lenders are more experienced with construction lending than others, and not all participate in the First Home Guarantee scheme. Working with a mortgage broker in Morningside who knows which lenders suit house and land packages can speed up the process and reduce the chance of delays once construction starts.

Should You Fix Your Interest Rate Before Construction Starts?

You can lock in a fixed rate at the time of land settlement, but most lenders only allow you to fix the rate for a portion of the loan during construction. The remainder stays on a variable rate until the house is finished. Once construction is complete, you can convert the entire loan to a fixed or split arrangement if you choose.

If variable rates rise during the build, your repayments could be higher than you expected once the loan converts to principal and interest. Some buyers prefer to fix a portion of the loan early for certainty, while others wait until construction is closer to completion. There is no single answer, but understanding your options before the land settles gives you more control.

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