What is a Land Loan?

A land loan is when someone borrows money from a lender to purchase a vacant block of land. This isn’t to be confused with a home-and-land package loan, which finances both the vacant land and the property you intend to build on it. For a land loan, the idea is that you will eventually build a house on it, but with no specific timeframe being determined. For now, you are purely seeking to gain ownership of a block of land.

Things to consider when looking at land loans

The size of the land. Typically, the land size (and therefore the price of the block) determines how much of a deposit you’ll need. Some lenders will loan you up to 95% of the property value, whereas larger lots might require a 20% deposit minimum.

The location of the land. Or to be more specific, the zoning regulations of your block of land (which is determined by location). Your land will be evaluated for things like accessibility, so for example lenders might not look at a remote regional lot with no sealed roads nearby as favourably – this can affect things like deposit amount and interest rates.

Registered vs. unregistered land. This is the key difference between whether a lender will approve funds or not. To get a land loan, the property will need to be registered as “ready to build on”, with completed road infrastructure and connected services.

Your intended purpose for the land. The same way that you can’t take out a home loan for a property and then turn it into a shop, you also can’t take out a residential land loan and then build a farm. To get loan approval, your intended use for the property you will eventually build on the land must be for personal or investment purposes.

Your intention to build on the land. If you have no plans to build property on this vacant land, most lenders will see this as a higher risk and thus you might have a harder time securing a loan (or at the very least, not be able to secure the same rates). And speaking of interest rates…

What to expect regarding interest rates for your land loan

Most of the time, vacant land loan interest rates will be higher than that of a standard home loan. This is because land prices tend to fluctuate more than properties with existing homes on them, not to mention vacant land typically takes longer to sell. As such, lenders like to err on the side of caution by charging higher interest rates.

However, our team of expert mortgage brokers will take the time to understand your goals and ambitions for your vacant land, so that we can compare the market and find the most suitable land loan for your unique circumstances. We can also assist with off-the-plan home loans, guarantor home loans, owner-occupied loans and more.

Get in touch to arrange a one-on-one consultation today.

Hear from others how BFG is making a difference

We are so happy to have been able to work with Sam at Benevolence Financial Group on bringing our home ownership dreams to life. As first home buyers we had no idea what we were doing and whether we were even in any kind of position to purchase. Sam explained everything and patiently answered our many questions, talking us through every step of the process.

Jen

Highly recommended. Sam and his team are a highly professional group who helped us with a refinance. They were attentive, proactive, and knowledgeable in their service as they guided us through the transition.

Oliver

Sam from the BFG looked after myself and my Fiance when we got our first home purchase. Sam was very down to earth, professional and really went above and beyond to help us every step of the way. He helped us, offered us support and made sure we get through things very smoothly. he answered all our questions and was always available to chat, was very proactive and always had the answers.

Reta

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Patrick

We met with Samuel and right from the start he listened to our goals and got us meeting with the relevant people. He was extremely proactive and found lenders to say yes when our current said no. Have used him many times and would recommend him to any small business owner who is trying to get ahead and set up an income for their future and future family. Look forward to continue to working with him and his team

Andrea

Samuel has been incredibly helpful guiding us through our first home purchase. He’s been incredibly patient, very responsive, and got us a great deal on our mortgage. On top of all that, his business model is geared toward socially responsible and ethically minded businesses/banks – something we really valued. It’s great to know our investment is doing something great for us, but also for others and the world. We would highly recommend this business and specifically Samuel, he’s just an absolute legend!