Getting Started with House & Land Packages
When you're looking to build a new home, house & land packages offer an attractive option for many Australians. These packages combine the purchase of suitable land with a fixed price building contract from a registered builder, creating a streamlined pathway to homeownership. However, financing these packages requires a different approach compared to purchasing an established property.
Unlike traditional home loans, construction finance is designed specifically for building new homes. The loan amount is released progressively as your build reaches key milestones, which means you only charge interest on the amount drawn down at each stage. This structure can significantly reduce your upfront costs during the construction phase.
Understanding Construction to Permanent Loans
A construction to permanent loan is the most common financing solution for house & land packages. This type of building loan combines two facilities into one: the construction funding phase and the ongoing mortgage once your custom home is complete.
During construction, you'll typically have interest-only repayment options, where you only pay interest on the funds that have been released. Once the build is complete and you receive your keys, the loan converts to a standard home loan with principal and interest repayments.
At Goodwin Home Loans, we can access construction loan options from banks and lenders across Australia, giving you more choices when it comes to construction loan interest rates and loan features.
The Progressive Drawing Process
One of the most important aspects of construction finance is understanding how the progressive drawdown works. Rather than receiving the full loan amount upfront, funds are released according to a progress payment schedule that aligns with specific building stages:
- Land purchase - Initial payment to secure the property
- Base stage - After the slab or foundation is complete
- Frame stage - Once the frame is up and roof is on
- Lock-up stage - When windows, doors, and external walls are complete
- Fixing stage - After internal fit-out, including plasters and fittings
- Completion - Final payment when the build is finished
This construction draw schedule protects both you and the lender by ensuring funds are only released as work progresses. Most lenders require a progress inspection before releasing each instalment, confirming that the work has been completed to an acceptable standard.
Ready to get started?
Book a chat with a Mortgage Brokers at Goodwin Home Loans today.
What You'll Need for Your Construction Loan Application
When applying for new home construction finance, you'll need to provide several key documents beyond what's required for a standard home loan:
- A copy of your fixed price building contract with a registered builder
- Council approval and development application documentation
- Detailed council plans and specifications
- Evidence that you can commence building within a set period from the Disclosure Date (usually 12 months)
- Proof that the builder is properly licensed and insured
- Costings that include allowances for site costs and additional payments
Lenders will assess both the land value and the proposed construction value when determining your borrowing capacity. The interest rate applied during construction may differ from standard home loan rates, and you'll typically pay a Progressive Drawing Fee (also called a progress payment fee) each time funds are released.
Understanding Contracts and Payment Structures
Most house & land packages operate under fixed price contracts, which provide certainty around your total loan amount. This differs from a cost plus contract, where variations and additional costs can impact your final budget.
Your progress payment schedule will be outlined in your building contract, showing exactly when payments are due and what percentage of the total contract price each payment represents. This Progressive Payment Schedule must align with your lender's construction draw schedule to ensure funds are available when your builder requests progress payments.
Quality construction depends on timely payments to sub-contractors, including plumbers, electricians, and other specialists. Your builder will coordinate these payments from the progress payment finance they receive at each stage.
Specialist Construction Finance Options
Beyond standard land and build loans, there are several specialist construction finance products available:
- Owner builder finance - For those managing their own construction project
- Renovation finance - Through a house renovation loan for major upgrades
- Project home loan - Specifically designed for project homes and volume builders
- Custom home finance - For unique, architect-designed properties with custom design elements
- Spec home finance - For builders constructing homes for future sale
- Off the plan finance - For apartments or townhouses purchased before completion
- Home improvement loan - For smaller renovation projects
Each type of construction funding has different requirements and features. As a renovation finance & mortgage broker, we can help you identify which product suits your specific situation.
Making Your Build Work Financially
The key advantage of construction finance is that you only pay interest on funds as they're drawn down. If your total building loan is $500,000 but only $200,000 has been released, you're only paying interest on that $200,000. This can create significant savings during the construction period, which typically takes 6-12 months.
However, you'll also need to consider your current housing situation. If you're renting while building, you'll need to budget for both rent and loan repayments. Some clients use bridging loans if they're selling an existing property to fund their new build.
For first home buyers, house & land packages can offer excellent value, particularly in growth areas where land values are increasing. The combination of purchasing new land and building a new home also means everything comes with builder's warranties and modern standards.
Working with the Right Mortgage Broker
Construction loans are more complex than standard mortgages, with multiple stages, inspections, and documentation requirements. Having experienced support throughout the process can make a significant difference to your experience.
At Goodwin Home Loans, we specialise in land and construction packages and work with you from initial application through to final completion. We'll help structure your construction loan application, liaise with your lender throughout the progressive drawdown process, and ensure your progress payments align with your building timeline.
Whether you're looking to build your dream home with a custom design, purchase a project home in a new estate, or undertake a major renovation, understanding your construction funding options is the first step.
Ready to start your building journey? Call one of our team or book an appointment at a time that works for you. We'll help you access the right construction loan options for your new home project.
