Plasterer's guide to house and land package home loans

As a plasterer, you've spent years perfecting your craft and building your reputation in the trades. Now you're ready to take the next step and invest in a house and land package. This type of property purchase can be an excellent choice for tradies, offering the opportunity to buy new construction in developing areas at potentially lower prices than established homes.

Understanding House and Land Packages

A house and land package involves purchasing vacant land and commissioning a builder to construct your home. This differs from buying an established property because you're essentially making two purchases - the land and the building contract. This structure affects how lenders assess your Home Loan application and influences the application process.

When applying for a home loan for a house and land package, lenders typically require two separate valuations and may release funds in stages as construction progresses. This means your borrowing capacity needs to cover both components, and you'll need to demonstrate sufficient income to service the loan amount throughout the building period.

Home Loan Options for House and Land Packages

Tradies like plasterers can access Home Loan options from banks and lenders across Australia, each offering different products suited to construction lending. The key types include:

• Variable interest rate loans - where your home loan interest rate can fluctuate with market conditions
• Fixed interest rate home loan - offering rate certainty during the critical construction phase
• Split loans - combining both variable home loan rates and fixed portions
• Construction loans - specifically designed for house and land purchases with progressive drawdowns

Each option has different implications for calculating home loan repayments during construction and once the home is complete.

Managing Your Financial Situation During Construction

Buying a home through a house and land package requires careful financial planning. During construction, you might pay interest-only repayments on funds drawn down, while still covering your current accommodation costs. Your financial situation needs to accommodate these dual expenses.

Lenders will assess your income differently as a tradesperson. Bank statements showing consistent earnings, tax returns, and BAS statements help demonstrate your capacity to service the loan. Some lenders offer interest rate discounts for borrowers in stable trade occupations like plastering.

Key Factors Affecting Your Home Loan

Several important elements influence your house and land package home loan:

Loan to Value Ratio (LVR): This determines whether you'll pay lenders mortgage insurance (LMI). Most lenders require LMI when borrowing above 80% of the property's value. The LVR calculation for house and land packages can be complex, as it may be based on the completed value or individual components.

Deposit Requirements: Beyond your deposit, you'll need funds for stamp duty, legal costs, and potential cost variations during construction. Some states offer stamp duty concessions for first home buyers purchasing new construction.

Home Loan pre-approval: Getting pre-approved helps establish your borrowing capacity before committing to land purchase and building contracts. This provides confidence in your budget and strengthens your position when negotiating.

Interest Rates and Loan Features

The property market for house and land packages often involves newer developments, which some lenders view favourably. This can provide access to competitive pricing on your home loan interest rate.

Consider loan features that benefit your situation:

• Offset account - linking your transaction account to reduce interest charges
• Redraw facilities - accessing additional repayments if needed
• Flexible repayment options - accommodating seasonal income variations common in trades

The Application Process

The streamlined application process for house and land packages involves several stages:

1. Initial pre-approval based on your income and deposit
2. Formal application once you've selected land and building contracts
3. Land settlement and initial drawdown
4. Progressive drawdowns during construction phases
5. Final settlement and conversion to standard home loan terms

Working with a mortgage broker who understands the trades industry can help ensure your application progresses smoothly through each stage.

Building Home Equity Through Smart Choices

House and land packages can be excellent for building home equity over time. New homes in growing areas may appreciate in value, while modern construction often requires lower maintenance costs - important considerations for busy tradies.

The combination of land ownership and new construction can provide solid foundations for your financial future, whether you plan to live in the property long-term or eventually use the home equity for investment purposes.

Choosing the right home loan structure from the start sets you up for success throughout the building process and beyond. With proper planning and the right lending partner, your house and land package can become the cornerstone of your property portfolio.

Call one of our team or book an appointment at a time that works for you. We understand the unique challenges tradies face and can help you secure the right home loan for your house and land package purchase.