Buying Land to Build on Later: What You Need to Know
You’ve found the perfect block of land, but you’re not quite ready to build just yet. No worries—a land loan could be the solution you need. However, it’s important to understand that financing vacant land works a little differently from a standard home loan. Here’s what you need to know before making your move.
Not everyone wants to buy an established home or even a house-and-land package.
Maybe you’ve come across a block in a prime location that you don’t want to miss out on. Or perhaps you want to secure the land now, pay it off gradually, and take your time planning the perfect home.
Whatever the case, financing a vacant block is possible—you just need to be aware of the key differences compared to a traditional mortgage.
What is a Land Loan?
A land loan, or vacant land loan, is designed specifically for purchasing an empty block of land.
Much like a regular home loan, you’ll typically need to pay a deposit, borrow a set amount, and choose between fixed and variable interest rate options. Some lenders may even offer features like offset accounts or interest-only repayments.
But—and this is a big but—land loans often come with additional requirements and conditions, depending on the lender and the size of the block.
What to Consider Before Applying for a Land Loan
1. You May Need a Larger Deposit
Vacant land is often considered a higher-risk investment by lenders. Why? Because it can take longer to sell compared to an established property if you default on the loan.
To offset this risk, banks may require a larger deposit—sometimes more than the usual 20%. And if you’re buying a larger plot of land, such as acreage, expect that deposit requirement to be even higher.
2. Interest Rates May Be Higher
Since vacant land doesn’t generate rental income and can be harder to sell, lenders often charge higher interest rates compared to standard home loans.
This makes it even more crucial to shop around for a competitive rate—or better yet, have a broker do it for you. That’s where we can help.
3. You May Be Required to Build Within a Certain Timeframe
Some lenders expect borrowers to start building within a specific timeframe—sometimes within two to five years of purchasing the land.
While not all banks impose this requirement, it’s something to check before signing on the dotted line. If a time limit applies, it could impact your budget, financing options, and overall construction timeline.
4. Other Factors Lenders Consider
Aside from your deposit and repayment ability, lenders will also assess the land itself. Things like:
Access to roads and infrastructure
Availability of utilities (water, electricity, sewage)
Zoning restrictions and council approvals
The shape and slope of the land
These factors can all impact a lender’s decision, so it’s important to do your homework before making an offer.
Talk to Us Before You Buy
Buying land now and building later can be a smart way to secure your dream home in the perfect location—but only if you go in with a solid plan.
Lenders have different requirements for land loans, and understanding them upfront can save you from headaches down the track.
If you’re thinking about purchasing a vacant block, give us a call first. We’ll help you explore your land loan options, find competitive rates, and ensure you have a clear path to turning your dream home into a reality.
Disclaimer: This article provides general information and should not be considered financial or tax advice. It does not take into account your personal circumstances. Always seek professional advice before making financial decisions. This content is protected by copyright laws and cannot be modified, reproduced, or republished without prior written consent.
