Construction Loans for House and Land Packages Explained

If you're a builder looking at house and land packages, you need construction finance that works around progressive payments.

Most lenders won't hand over the full loan amount upfront. They release funds in stages as the build progresses, and you only pay interest on what's been drawn down. The structure matters because it affects your cash flow from day one, and if you're juggling subcontractor payments on other jobs, knowing exactly when money hits your account makes a difference.

How Progressive Drawdown Actually Works

You'll receive funds in instalments tied to specific stages of the build. The lender arranges a progress inspection before releasing each payment, which means someone physically checks that the slab is down or the frame is up before approving the drawdown. Most lenders release funds according to a five or six stage schedule: land purchase, base stage, frame stage, lock-up stage, fixing stage, and completion.

Consider a builder purchasing a house and land package in outer Brisbane at $650,000. The land component is $250,000 and the build is $400,000 under a fixed price building contract. The lender releases $250,000 at settlement for the land, then $80,000 at base stage, $120,000 at frame, $100,000 at lock-up, $60,000 at fixing, and the final $40,000 at completion. Between base and frame, you're only paying interest on $330,000 even though your total loan is $650,000. That gap saves you around $350 per month in interest charges during that period, assuming current variable rates.

Interest Charges During Construction

You'll pay interest only on the amount drawn down at each stage. If $330,000 has been released and the rest hasn't, you're charged interest on $330,000. Most lenders offer interest-only repayment options during construction, which keeps your monthly outgoings lower while the build is underway. Once the build completes and you draw down the final payment, the loan converts to standard principal and interest repayments unless you've arranged otherwise.

Lenders also charge a Progressive Drawing Fee each time they release funds. This typically sits between $300 and $500 per drawdown. Across six drawdowns, that's $1,800 to $3,000 in fees before you've moved in. You won't avoid this cost, but you should factor it into your budget upfront.

What You Need Before Applying

Lenders want to see council approval, fixed price building contracts, and proof you're working with a registered builder. The council plans need to be stamped and approved before most lenders will issue formal approval. If you're buying off a volume builder as part of a house and land package, the builder usually handles the development application and provides the contract. If you're doing a custom design on suitable land you've purchased separately, you'll need to submit plans yourself and wait for council approval before the lender proceeds.

You'll also need to commence building within a set period from the Disclosure Date, usually six to twelve months depending on the lender. Miss that deadline and your approval lapses. This matters if you're buying land in a new estate where titles haven't been released yet. Some builders sit on house and land packages for months waiting for titles, and if your construction loan approval expires in the meantime, you're back to square one with the application process.

Fixed Price Contracts and Cost Plus Arrangements

Most lenders prefer fixed price building contracts because they know exactly what the build will cost. A cost plus contract, where you pay the builder's costs plus a margin, introduces uncertainty. The lender has no way to cap the loan amount if costs blow out, which makes them nervous. If you're acting as an owner builder or using a cost plus arrangement, your construction loan options narrow considerably. Some lenders won't touch cost plus contracts at all, and those that do will usually require a larger deposit or charge a higher interest rate.

In a scenario where a concreter is building their own home using subbies they know from other jobs, they might assume a cost plus contract gives them more control. It does, but it also means fewer lenders and higher borrowing costs. Unless you have a deposit above 20%, expect most mainstream lenders to decline the application outright.

How the Progress Payment Schedule Aligns With Builder Payments

The lender's progress payment schedule won't always match the progress payments your builder demands. A builder might want 10% upfront, 15% at slab, 30% at frame, 25% at lock-up, 15% at fixing, and the final 5% at handover. The lender might release 20% at base, 30% at frame, 25% at lock-up, 15% at fixing, and 10% at completion. The percentages don't line up, which means you could be out of pocket between drawdowns if the builder wants money before the lender releases it.

This gap is where builders with cash flow from other jobs have an advantage. If you're paying subcontractors on another site and waiting for a drawdown on your own build, the timing mismatch can stretch you thin. Some builders arrange a small buffer in their offset account specifically to cover this gap, while others negotiate payment terms with their own builder that match the lender's drawdown schedule more closely.

Land and Build Versus House and Land Packages

A house and land package from a volume builder is usually simpler to finance than buying land separately and arranging your own build. The package comes with council approval already sorted, a registered builder attached, and a fixed price contract in place. The lender sees less risk, which often translates to a faster approval and fewer hoops to jump through.

If you're buying suitable land and arranging a custom build, you'll need to manage council plans, engage your own registered builder, and wait for approvals before the lender proceeds. The process adds weeks or months to the timeline, and if council requests changes to the plans, your construction loan approval can be delayed while you sort it out. For builders who know exactly what they want and have the time to manage the process, a land and build loan on separate land gives more control. For those who want to move quickly, a house and land package cuts the timeline in half.

Call one of our team or book an appointment at a time that works for you. We'll walk through your numbers, confirm what you qualify for, and line up lenders who actually fund construction for tradies without the runaround.

Frequently Asked Questions