Everything You Need to Know About House and Land Loans

What Makes a House and Land Package Different for Finance?

A house and land package requires two separate contracts and two settlement stages. You purchase the land first, then enter a building contract with the developer or builder. Your lender releases funds at land settlement and again progressively as the build reaches specific stages. This structure affects how your home loan is approved, how deposit requirements are calculated, and which government concessions apply.

In Traralgon, most house and land developments sit within the broader Latrobe City Council area, where Victorian stamp duty concessions and the First Home Owner Grant apply to new builds. The two-contract structure means your broker needs to coordinate timing between land settlement, construction drawdowns, and your occupancy obligations under state grants.

Using the Victorian First Home Owner Grant on a House and Land Package

The Victorian FHOG provides $10,000 for new homes valued up to $750,000. With a house and land package, the $750,000 cap applies to the combined value of the land and the completed build, not the land alone. If your land costs $220,000 and your building contract is $480,000, your total package is $700,000 and the grant applies.

The grant is paid after you settle on the land but before construction is complete. You must move into the finished home within 12 months of the build completing and live there for at least 12 continuous months. If construction delays push occupancy beyond that window, you need to apply for an extension from the State Revenue Office Victoria.

Stamp Duty Savings for First Home Buyers in Traralgon

Victoria offers a full stamp duty exemption on new homes valued up to $600,000, with a sliding concession on properties between $600,001 and $750,000. A house and land package in Traralgon valued at $650,000 would attract a partial concession, reducing duty by several thousand dollars compared to the standard rate.

The duty exemption or concession applies at land settlement. Your conveyancer calculates duty on the total package value, not just the land component. This contrasts with Queensland, where first home buyers purchasing new homes or vacant land receive a full duty concession with no price cap. In Victoria, staying under the $600,000 threshold eliminates duty entirely, but most house and land packages in Traralgon sit between $600,000 and $750,000 given current land and build costs in the region.

How Lenders Assess a House and Land Package

Lenders assess your borrowing capacity based on the total package value, not the land price alone. If you are purchasing land for $210,000 and signing a build contract for $460,000, the lender evaluates your capacity to service a $670,000 loan at current variable rates, factoring in your income, existing debts, and living expenses.

Some lenders require the building contract to be signed and priced before they issue unconditional pre-approval. Others will pre-approve based on the land contract and an estimated build cost, then reassess once the building contract is finalised. If the final build price exceeds the estimate, you may need to increase your deposit or adjust your borrowing.

Deposit Requirements and the 5% Deposit Scheme

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit and no Lenders Mortgage Insurance. In Victoria, the property price cap is $950,000 for capital city and regional centres, which includes Traralgon under the current postcode classification. For other areas in Victoria, the cap is $650,000.

With a house and land package valued at $680,000, a 5% deposit is $34,000. Housing Australia guarantees the difference between your deposit and 20% of the property value, removing the need for LMI, which would otherwise add several thousand dollars to your upfront costs. You apply through a participating lender, not directly through Housing Australia. Not all lenders offer the same loan features under the scheme, so confirm whether variable rates, fixed interest rate options, or offset accounts are available before proceeding.

What Happens at Land Settlement and During Construction

At land settlement, your lender releases funds to cover the land purchase and any duty or legal costs. You become the landowner and begin paying interest on the amount drawn. Construction has not yet started, so you are servicing a loan without living in the property.

As the build progresses, your lender releases further funds at each stage: slab down, frame up, lockup, fixing, and practical completion. Each drawdown requires a site inspection by the lender's valuer. You pay interest only on the amount drawn at each stage, not the full loan. Once construction reaches practical completion and you settle with the builder, the loan converts to principal and interest repayments unless you have negotiated a different structure.

Consider a buyer purchasing land in Traralgon for $215,000 with a building contract of $465,000. The total package is $680,000. At land settlement, the lender releases $215,000 plus costs. Over the next six to eight months, the lender releases the remaining $465,000 progressively. During construction, the buyer pays interest on the drawn amount, which starts at $215,000 and increases as each stage is completed. Once the build is finished, the full loan is active and repayments shift to principal and interest.

Fixed, Variable, or Split Loan Structures for a House and Land Package

During construction, most lenders charge interest at a variable rate on the amount drawn, even if you intend to fix the rate once the loan is fully drawn. Some lenders allow you to lock in a fixed rate at land settlement, but this means you pay interest at that fixed rate on the full loan amount from day one, even though construction funds have not yet been released.

A split loan structure allows you to fix part of the loan and keep part variable once construction is complete. This provides certainty on a portion of your repayments while retaining access to an offset account on the variable portion. Many fixed rate products do not include offset functionality, so splitting the loan preserves that option without sacrificing rate stability entirely.

Income and Employment Requirements for First Home Buyer Eligibility

Lenders assess your income stability and employment type when approving a home loan application. Permanent full-time or part-time employment with at least three to six months in your current role is typically sufficient. Casual employment may require 12 months of consistent hours with the same employer, or two years if income fluctuates.

Self-employed buyers usually need two years of tax returns showing consistent or increasing income. Some lenders accept one year of returns if your accountant provides a letter confirming projected income, but this is less common for first home buyers without prior property ownership.

Managing Your Budget During Construction

You need enough savings to cover the deposit, duty, legal fees, building inspection costs, and at least three to six months of loan repayments during construction. If you are renting while the build progresses, you are paying both rent and loan interest simultaneously.

In Traralgon, rental demand remains steady due to the town's role as a regional hub for Latrobe Valley services and its proximity to employment in health, education, and energy sectors. Buyers often continue renting locally during construction rather than relocating temporarily. Your budget should account for this overlap period, which typically runs six to nine months depending on build speed and weather delays.

When to Speak to a Mortgage Broker About a House and Land Package

Start the conversation before you sign the land contract. A broker can confirm which lenders accept house and land packages, what deposit you need, whether you qualify for the 5% Deposit Scheme or other low deposit options, and how construction drawdowns will be managed. Some developers require unconditional finance approval before releasing the land contract, so timing matters.

We work with buyers across Traralgon and the Latrobe Valley to structure loans that align with construction timelines and state grant eligibility. Call one of our team or book an appointment at a time that works for you.

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