Buying vacant land usually takes a bigger deposit than buying a house, and it is harder to get approved. Lenders see a bare block as riskier, so you need to plan the deposit, the build and your paperwork before you sign a contract.
This is for concreters who want to buy a block now and build later, or build straight away. Your income swings with the weather and the job pipeline, and lenders know it. Get the structure right early.
Why Is It Harder to Get a Home Loan for Vacant Land?
Lenders treat vacant land as higher risk because there is no dwelling to secure the loan against. That usually means lower maximum LVRs, a smaller pool of lenders and extra checks on the block.
The practical result is a lower maximum LVR (loan to value ratio) and a smaller pool of lenders. Policies differ a lot. Some lenders ask for an LVR of 70 to 80% or lower on land loans, while a small number will go higher in certain cases, such as when the land is packaged with a construction loan. Block size and zoning also matter. Larger or rural-zoned blocks tend to get lower LVRs and fewer lenders.
The trade-off is simple. A smaller loan means less risk for you, but you need more cash up front.
How Much Deposit Do You Need to Buy Vacant Land?
Many mainstream lenders want about 20% of the land's value as a deposit, though it depends on the lender, the location and the block. Lenders Mortgage Insurance (LMI) is rarely available on vacant land. So a low deposit is often not an option on a land-only purchase.
On top of the deposit, you need cash for settlement costs. Your broker can run the numbers for your target block and lender before you make an offer.
If you plan to buy land and build in one go, the picture can change. Many lenders assess the combined value of the land plus the completed home, which allows a higher overall LVR. The cost is that you carry a bigger total debt and must pass serviceability on the build as well. Our construction loans for tradies page explains how staged drawdowns work.
Land Loan or Construction Loan: Which Do You Need?
A land loan pays for the block. A construction loan pays for the build in stages as work is completed.
If you buy land first, you usually need a land loan now and a construction loan later. The land is paid in one lump sum, and the construction loan is drawn down in stages. Some lenders let you roll one into the other when you are ready to build.
Check the time limit. Lenders that set a deadline often expect construction to start within about 6 to 24 months of settlement. Some allow longer or set no deadline, so confirm the exact term with the lender. If you want to sit on the block for longer, tell your broker up front, because some lenders will not allow it.
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Book a chat with a Finance & Mortgage Brokers at Tradie Home Loans today.
How Do Lenders Assess a Concreter's Income?
Lenders assess a self-employed concreter on the income your business can show, not on what you earn in a good month. Your tax returns and financials carry most of the weight.
Lumpy income, big expenses and a year with a slow patch can all affect your borrowing capacity. If you run your own business, read our guide to self-employed loans for tradies. If you want a rough idea of what you can borrow, start with borrowing capacity.
If you work as a subbie or an employee for a concreting firm, the assessment is different again. Tell your broker how you are paid so they pick lenders that suit it.
Calculating Home Loan Repayments on a Land Loan: A Worked Example
Consider a concreter whose income rises and falls with the season. They borrow $400,000 for a block, on a principal and interest variable rate. We use the illustrative rate of 6.75% p.a. over 30 years. Your actual rate will depend on your deposit size and lender.
The repayment comes to about $2,594 a month. Interest alone on the same amount at the same rate would be $2,250 a month, but that interest-only figure is shown for comparison only. Lenders do not assess you at 6.75%. They test your ability to repay at a rate at least 3 percentage points higher (about 9.75% in this example), so the repayment used in the assessment is higher than $2,594.
The concreter picks a loan with an offset account and keeps spare cash from busy months in it. That cash cuts the interest charged on the loan, and it is still there to cover repayments in a quiet month. The outcome is a repayment they can meet year-round, plus a buffer that works for them.
The trade-off is that offset loans can carry a higher rate or an annual fee, depending on the lender. Compare the total cost, not just the rate. Use a repayment calculator to test your own loan amount.
Variable Rate or Fixed Rate on a Land Loan
A variable rate moves with the lender's decisions, while a fixed rate locks your repayment for a set period. Which suits you depends on how much a rate change would hurt your cash flow.
A variable rate usually gives you more room to make extra repayments and use an offset. A fixed rate gives certainty, but extra repayments may be capped and breaking the loan early can cost you. You can also split the loan between the two. Ask how the lender treats the loan when your fixed term ends and you move into construction.
Get Home Loan Pre-Approval Before You Chase a Block
Pre-approval tells you what a lender is likely to lend before you commit to a contract. It does not lock in the land or the rate, and the lender will still check the property when you apply.
With land, that matters more than usual. The block itself needs to meet the lender's rules on size, zoning and location. Sorting that out before you put down a deposit stops you from losing money on a block no lender will back. Read how getting loan pre-approval works, then make your home loan application with the right lender already picked.
If you are buying to live in, make sure the lender knows your plan. Land purchased to build and live in is assessed differently from land held as an investment. Our home loans for concreters page covers how we handle trade income, and our finance for tradies and home loans for tradies pages show the wider range of lenders we work with.
Call one of our team or book an appointment at a time that works for you. We will check the block, work out your deposit and find a lender that fits how you earn.
Frequently Asked Questions
How much deposit do I need for a vacant land loan?
Many mainstream lenders want around 20% of the land's value, though it varies by lender, location and block. LMI is rarely available on land-only loans, so a low deposit is often not possible.
Can I buy land now and build later?
Yes, but lenders that set a deadline often expect you to start construction within about 6 to 24 months of settlement. Some allow longer or set no deadline, so confirm the exact term with the lender before you choose one.
What is the difference between a land loan and a construction loan?
A land loan pays for the block in one lump sum. A construction loan pays for the build in stages as work is completed.
Can a self-employed concreter get a vacant land loan?
Yes. Lenders assess the income your business can show, usually through tax returns and financials. A broker can match you with lenders that suit how you are paid.
