Many people across Australia are currently investing in home and land packages. This process enables the buyer to purchase a plot or some acreage of land and the right to build a home at the same time, but with two separate contractors. One great advantage of home and land packages is that each buyer can decide on the design and features of their future home.
Purchasing a perfect home and land packages consists of two major steps. You buy the land first, and then you buy the home. You get two loans, one for each step of the process, but these two loans are combined.
To buy the land, you must first obtain a conventional mortgage and then apply for a construction loan. This loan is scheduled for repayment at the end of each phase of home construction. If this is your first home, you may be eligible for grants from your state of residence to help you buy, and make your dream home. You may also be eligible for tax or stamp duty breaks.
Home and land packages are frequently offered in order to attract a specific group of prospective buyers. Many of these packages are available for golfing estates, eco-communities, and retirement communities. If you search for these real estate packages on website listings, you will most likely find a variety of home and land packages. You should also contact local property developers to enquire about opportunities to obtain a package.
Home and Land Packages
Property developers frequently buy sizable tracts of land and then offer some of it for sale. Then, developers can give the buyer a choice between two types of house and land packages.
The first option is the typical home and land bundles. Using a construction loan, you first purchase the land before starting to build your dream home.
A turnkey package, on the other hand, is exactly what it sounds like: a ready-made home that you can enter by turning the key in the lock. This kind of package is also referred to as a “complete” or “move-in ready” new home. Your home is ready for you to move in with a fully fitted kitchen, flooring, bathrooms, and more, so you don’t need to do any additional work.
Keep in mind that your options for home design will be constrained if you buy a house and land package. Property developers will typically present you with a variety of customizable home designs from which you can pick. You will also have the option to upgrade your property, but exercise caution because doing so could quickly increase the price of your new house.
How do home and land packages work?
A home buyer will have contracts for both land and construction for both standard homes and land and turnkey packages because they are purchasing from two different businesses. The builder and developer will cooperate without any conflicts of interest throughout the entirety of the home’s construction in both offers. Compared to purchasing a plot of land from a developer and then needing to find a builder yourself, this simplifies the process.
The financial arrangements represent the primary distinction between the two types of packages.
You will have two contracts if you decide to purchase the land first and then construct your house, as was previously mentioned. both for the building contract and the mortgage on the property. Depending on the situation, the loans may be combined with one lender or they may be divided.
A construction loan is frequently drawn down from an agreed loan amount in stages, so the buyer only pays interest on the amount as it is used. Pouring the concrete slab, building the walls and roof, securing the house, and finishing the project are the general construction phases.
Turnkey packages make things a little easier. Turnkey deals typically include a single fixed price for both the land and the building, with the two contracts packaged together. Additionally, the money is given to the real estate developer because the price of the home and the land is fixed. Once it is finished, all you have to do is move into the house.
As a result, you won’t have to deal with unforeseen issues like builders requesting additional funds midway through a project because they are underquoted. When deciding to purchase, you will be informed of the up-front costs and the anticipated time frame for building your home, making it an easy decision for many first-time home buyers.
Things to know before buying a home and land package in Australia
The convenience provided to home buyers is among the biggest benefits of purchasing a house and land package. To increase your chances of a successful build, you could do the following:
-
Do your research
Performing your due diligence prior to moving forwards with any transaction is arguably the most crucial step in buying a house and land package. Have a clear idea of the type of home you want, the size of the lot you prefer, and any other features you want in your house (e.g., landscaping, driveways, fencing etc). This might enable you to reduce your options and reach a decision.
Check to see if the areas you are interested in have the facilities you’ll need, such as hospitals or other medical facilities, retail centres, schools, and public transportation. If you’re an active person, for instance, you might also want to live somewhere with lots of parks and other recreational spaces.
This step will also require you to conduct research on potential developers and the builders with whom they collaborate. Examine the previous building projects they have completed to get an idea of their quality of work and shop for the best price that also fits your preferences.
-
Contact a developer
After conducting your research, you can meet with a developer who offers a house and land package that meets your needs and preferences. Because all builders and houses are different, make sure you carefully examine their prices, estimated build time, and any hidden costs in the contract.
Know the developer and what they’ve previously delivered. You can request to see a variety of display homes on your prefered estate. Ask for specifics on what is and isn’t included in the deal – display homes feature the best fittings, finishes, and appliances that may not be included in the standard package. Also, communicate your desires for your layout, as this can be a problem for builders.
If you are unsure how to review transaction documents, seek professional assistance from a financial adviser.
-
Perform due diligence before hiring a developer and builder
Before you sign a contract with a builder for a house and land package, ask for examples of houses they’ve worked on in the last two years. It would be beneficial to speak with its owners as well, as this will provide you with insight into the process and how satisfied they are with their home.
In addition to these checks, ensure that your builder is licenced and has builder’s insurance. Ensure that they have also checked the lot for suitability.
-
Cover all your financial bases
To proceed with your purchase of a house and land package, you must demonstrate your ability to repay the money you will borrow. To demonstrate your ability to pay your deposit, the typical financial documents require your last two payslips, your most recent tax return, and your savings history.
Following that, keep in mind any costs that are not included in the package. Stamp duty, taxes, and registration fees are not included in the purchase price of a house and land package.
Buyers, like all property buyers, should have a legal representative to work with the developer and builder to ensure that all council and regulatory requirements are met. You will need building plans that have been approved by the council, a building contract, quotes for other work, and building specifications. When you buy a turnkey property, these costs are included in the contract.
-
Before signing the contract, consult with a lawyer
Congratulations! You’ve discovered a package that meets your requirements and preferences. But don’t sign on the dotted line until your solicitor has reviewed the contract for workmanship warranties, builder’s health coverage, plans and specifications, and any cost differences (known as variances).
The Ultimate Guide to Purchasing the best House and Land Package for Your Family
The following are some helpful hints and pointers for buying a home and land package for your family:
- Investors Should Consider Potential ROI If you are a property investor considering purchasing a house and land package, you should first consider your potential return on investment. If the land is in a rural or remote area, this package might not be a good investment for you.
- It may be difficult to find renters in this area for your home. Purchasing a package in a neighbourhood where the majority of homeowners live in their homes can be a good idea. These neighbourhoods are typically well-kept, and renters find them appealing places to look for housing.
- Buyers Should Think About Every Aspect of the Transaction. Avoid making a hasty purchase decision for this property and home construction deal. Consider the size of the land as well as the overall home, lawn, and garden space. Consider how your future potential renters will perceive this property and the new house once it is completed.
- Buyers must completely comprehend the package. As a buyer, it is critical that you fully comprehend all aspects of your house and land package. Determine whether the developer will include a garage, a driveway, and landscaping as part of the overall construction of your home. Also, make sure to budget carefully and set aside some money for any unexpected expenses.
Prices for house and land packages versus traditional purchasing or building methods
Because new housing estates are typically located in outer suburban or regional areas where land is less expensive, the land component of a house and land package may be less expensive. Furthermore, the cost of building package homes or project homes is frequently lower due to builder economies of scale.
As a result, a newly constructed home is typically less expensive to purchase than an equivalent established home. The time lag between putting down a deposit on land, completing the land purchase, and then making building progress payments with a construction loan (see below) allows you to plan your finances rather than having to come up with the entire amount up front. In the short term, new homes will be less expensive to maintain than homes that have already seen some wear and tear.
As a result, both owner-occupiers and investors have the potential to make greater capital gains from house and land packages than from purchasing an existing home.
How a house and land package is financed
Purchasing a house and land package typically involves two steps: purchasing the land and then building the house. This means that there could be two contracts and two loans involved, though your lender may bundle the loans together.
The loan for the land purchase is a standard home loan. However, the loan for purchasing the house is most likely a construction loan. This latter type of loan entails making progress payments to the builder as various stages of construction are completed so that you only pay the interest on the progressive amounts you have drawn down instead of the entire loan amount at the outset.
Lenders are familiar with the concept of house and land packages, so obtaining a loan should be no more difficult than obtaining a loan to purchase an existing home, and easier than obtaining two separate loans to purchase a vacant land parcel and then erect a custom-built home.
Steps to buying home and land packages
1: Get Pre-Approval
Similarly, to how purchasing a home begins with obtaining pre-approval from a lender, purchasing a house and land package begins with the same. Typically, you will be required to obtain two loans: a mortgage for the land and a construction loan, which will be bundled together in a fixed-rate loan. Once you have pre-approval, you must find a solicitor or conveyancer to complete the transaction. You can then continue your search for your ideal house and land package.
If you’re still browsing, you don’t need to finish this process. However, it is preferable to do this first in case you find your dream home and don’t want to miss out on the opportunity.
2: Find Your House and Land Specialist
This is a critical step. After receiving pre-approval and working with a conveyancer, you’ll have a better idea of what you can afford and will be able to work with a house and land specialist. Choose a specialist with a large inventory so you have a variety of options for house and land packages.
3: Pay A Non-Refundable Reservation Fee
The technical steps of purchasing a house and land package begin now, as the next few steps differ greatly from those of purchasing a home. When you find a package that meets your needs, you must pay a reservation fee to secure the property. This can range between $500 and $5,000 and ensures that no other buyers can purchase the land.
4: Make a deposit and sign the Unconditional Exchange Agreement
The clock starts ticking once you pay the reservation fee. To avoid losing your reservation fee and the property, you must pay a 10% deposit on the property and build within fourteen days of paying the reservation fee. The reservation fee is included in this price. You will also sign the unconditional exchange, which states that the cooling-off period has ended and that the contract is now legally binding on both parties.
5: Pay the Remaining Cost and Settle the Amount
You must pay the settlement costs once your home has been completed, also known as practical completion, and in accordance with the terms of the agreement, which usually requires you to pay the remaining costs within ten days of practical completion. You will now own both the house and the land.
In terms of the technical aspects of how house and land packages work, the primary distinction between buying a home and buying a house and land package is that you do not have to pay all expenses upfront. You pay 10% to secure the property and enter into the agreement, and the remaining 90% at the closing, which can take months or even a year. You also do not have to submit any bids or compete with buyers at an auction. Your costs are laid out in the early stages, and you have the option to customise your home to your preferences. All of the elements that are missing when purchasing a resale.
House and land package types and where to find them
Property developers buy land as it is released by the government and offer two different types of house and land packages to buyers. The first step is to purchase your land and then use a construction loan to build your home.
The second option is to purchase the completed house on the developer’s land. This is referred to as a ‘turnkey’ package because your home is ready for you to move in with a fully fitted kitchen, flooring, bathrooms, and other amenities.
Turnkey properties, which are advertised with a single, fixed price for land and construction, will not leave you with any unpleasant surprises, such as builders calling up for more money mid-construction due to underquoting. You will be aware of all costs and the estimated time frame for the construction.
Many first-time home builders prefer it because it provides them with the peace of mind of a smooth construction process and allows them to move in sooner.
You may be aware of new estates popping up in your neighbourhood, but the house and land packages can also be found advertised on major real estate listing websites. Contacting property developers directly, on the other hand, can help you find the right package and will be more informative.
Shop around, look into other estates they’ve built, and look into all of the packages offered by different developers. When purchasing a house and land package, make sure all of your questions are answered by your developer!
What’s involved in purchasing a house and land package
The real distinction between purchasing a house and land package and purchasing an existing home is in the financing arrangements.
If you purchased the land first and then built your new home, you will have two contracts: one for your mortgage on the land and one for the construction loan. Depending on the circumstances, the loans may be combined or separated.
A construction loan is typically drawn down in stages of an agreed loan amount, which means you only pay interest on the amount as you use it. There are typically four stages of construction:
- The concrete slab is poured.
- Putting up the walls and roof
- Securing the home (also known as the ‘lock up stage’)
- Completion of the project
It’s a little easier with ready-made turnkey packages. The two contracts are combined, and because the house and land have a fixed price, the finance is released to the property developer immediately, allowing you or your tenants to move in right away.
You will obviously have more design options when building your own home than when purchasing a pre-built property. Your property developer will show you a variety of customisable home designs from which to choose, as well as the option to add extras.
Be cautious because any upgrades you choose, from granite countertops to the size of your doors and windows, can quickly increase the cost of your new home. Landscaping, driveways, and fencing are optional extras that may or may not be included in the package price.
How financing works with a house and land package
Purchasing a house and land package typically involves two steps: purchasing the land and then building the house. This means that there could be two contracts and two loans involved, though your lender may bundle the loans together.
The loan for the land purchase is a standard home loan. However, the loan for purchasing the house is most likely a construction loan. This latter type of loan entails making progress payments to the builder as various stages of construction are completed so that you only pay interest on the progressive amounts you have drawn down rather than the entire loan amount at the outset.
Lenders are familiar with the concept of house and land packages, so obtaining a loan should be no more difficult than obtaining a loan to purchase an existing home, and easier than obtaining two separate loans to purchase a vacant land parcel and then erect a custom-built home.
How much of a down payment is required for a house and land package?
The deposit rules are the same as they are for any home loan. Unless you have a loan guarantor, lenders will require a 20% down payment if you want to avoid paying the lender’s mortgage insurance. The deposit is calculated as a percentage of the estimated value of the house and land after construction is finished.
