Top Strategies to Buy a House and Land Package

Buying a House and Land Package with a Low Deposit

Navy members can purchase a house and land package with as little as a 5% deposit without paying Lenders Mortgage Insurance. The First Home Guarantee, expanded from 1 October 2025 with no income caps and no place limits, allows eligible buyers to purchase with as little as a 5% deposit without paying LMI. For Defence personnel, this federal scheme stacks with no LMI options available specifically to ADF members, creating a significant cost advantage.

Consider a buyer purchasing a house and land package valued at the median for their area. Under the federal guarantee, they avoid LMI altogether. If they also qualify for a Defence-specific lender policy, they can access preferential rates and further waivers. The combined effect reduces upfront costs by tens of thousands of dollars compared to civilian borrowers.

The distinction matters because house and land packages are classified as new builds, making them eligible for both the First Home Guarantee and most state-based grants. The federal scheme covers you for LMI, while state governments often provide cash grants or stamp duty relief specifically for new construction. Navy members stationed in regions with generous first home buyer support should examine both layers before deciding where to buy.

State Grants That Apply to New House and Land Packages

Most state governments offer grants exclusively for new homes, and house and land packages qualify in every state. Queensland offers up to $30,000 towards buying or building a new home valued under $750,000, running until 30 June 2026. The Northern Territory's HomeGrown Territory Grant is $50,000 for eligible first home buyers buying or building a new home, running until 30 September 2026, with no house price cap. South Australia provides a $15,000 grant for new homes up to $650,000 and abolished stamp duty on new builds regardless of price from June 2024 onwards.

A Navy member posted to Darwin who qualifies for the NT grant receives $50,000 towards their purchase without any cap on the property value. That grant applies at settlement and can be used to reduce the amount borrowed or cover costs like landscaping and driveways, which are often additional expenses with house and land contracts. The Northern Territory scheme is the largest in the country and one of the only programs without a purchase price ceiling, making it particularly useful for buyers in areas where land costs are high.

In Queensland, the $30,000 grant applies to contracts signed before 30 June 2026. If you are considering a house and land package in a growth corridor near RAAF Base Amberley or around Townsville, the timing of your contract signature determines eligibility. The grant must be claimed within 12 months of settlement, and you must move into the property within 12 months of completion.

How the Two-Contract Structure Affects Your Loan Application

House and land packages involve two separate contracts: one for the land and one for the building. The land contract settles first, which means you need finance approval for the land purchase before construction begins. Most lenders treat this as a construction loan, releasing funds in stages as the build progresses rather than in a single lump sum at settlement.

Your lender will require a copy of both contracts, the builder's fixed-price building agreement, and evidence that the builder is registered and insured. Some lenders also require progress inspection reports before releasing each stage payment. The contract for the land usually specifies a settlement period of 30 to 90 days, while the building contract includes a construction timeline, often 6 to 12 months depending on the size and complexity of the home.

If you are using the First Home Guarantee, the government's guarantee applies to the total package value, not just the land component. This means your 5% deposit is calculated on the combined purchase price. The lender assesses your borrowing capacity based on the full loan amount required for both land and construction, so your income and expenses are evaluated against the total debt, not just the initial land settlement.

Pre-Approval Before Signing a Land Contract

You should secure pre-approval before signing any contract for land. Pre-approval confirms how much you can borrow and locks in indicative loan terms for a period, usually 90 days. Developers often require a cooling-off period waiver and a 10% deposit within days of signing, so you need certainty about your finance before committing.

Pre-approval for a house and land package requires both contracts and a valuation of the completed home, not just the land. Lenders order a valuation based on the plans and specifications provided by the builder. If the valuer assesses the completed home at less than the combined contract price, the lender may reduce the loan amount or require a larger deposit to cover the shortfall. This is why choosing a builder with a solid reputation and realistic pricing is important.

Navy members frequently relocate, so your pre-approval should account for the possibility of a posting before construction completes. Some lenders allow you to rent out the property before you have lived in it if your circumstances change due to Defence relocation, but this must be discussed upfront. If you intend to claim a first home buyer grant, most states require you to occupy the property as your principal place of residence within 12 months of completion, so a posting that moves you interstate before that deadline can affect your eligibility.

Fixed or Variable Rates for a Construction Loan

Construction loans typically start on a variable rate during the building phase, converting to your chosen rate type once construction is complete. During construction, you pay interest only on the funds drawn down, not the full loan amount. Once the build is finished and the final progress payment is made, the loan converts to principal and interest repayments, and you can choose to fix part or all of the loan at that point.

Some lenders allow you to lock in a fixed rate at the start of the construction period, but this means you pay interest on the full loan amount from day one, even though the funds have not been fully drawn. This approach costs more during construction but provides certainty if you expect rates to rise before the build completes. Most Navy members opt for the variable rate during construction and then fix a portion once they take possession, particularly if they want to use an offset account to reduce interest during the early years of the loan.

Borrowing Capacity and Defence Income

Lenders assess your borrowing capacity using your base salary plus any allowances that are regular and ongoing. For Navy members, this includes sea-going allowance, separation allowance, and rental assistance if applicable. Allowances that are temporary or deployment-specific are usually excluded unless you can demonstrate a consistent history of receiving them over at least 12 months.

A sailor earning a base salary of $85,000 plus $15,000 in allowances has a total assessable income of $100,000, provided the allowances meet the lender's criteria for consistency. This additional income increases borrowing capacity by approximately $75,000 to $90,000 depending on your other commitments and the lender's serviceability buffer. If you are applying with a partner who is also working, their income is included in full unless they are on parental leave or a fixed-term contract that ends before loan settlement.

Your existing debts reduce your borrowing capacity. Credit card limits are assessed as if you owe the full limit every month, even if you pay the balance in full. A $10,000 credit card limit reduces your borrowing capacity by roughly $40,000 to $50,000 depending on the lender. If you have a car loan, personal loan, or HECS debt, those repayments are deducted from your surplus income before the lender calculates how much you can borrow. Paying down or closing unused credit facilities before applying for pre-approval can increase your borrowing capacity significantly.

Gifted Deposits and Genuine Savings

Most lenders require genuine savings if you are borrowing more than 90% of the property value, but the First Home Guarantee and Defence-specific policies often waive this requirement. Genuine savings are funds you have saved over at least three months, held in your own name, and verified by bank statements. If you are using a 5% deposit scheme, you may not need to demonstrate any genuine savings at all, depending on the lender.

Gifted deposits are allowed by most lenders, provided the gift comes from an immediate family member and is accompanied by a signed declaration that the funds are a gift, not a loan. The declaration must state that the family member has no interest in the property and does not expect repayment. Some lenders allow up to 100% of the deposit to be gifted, while others require at least half the deposit to come from your own savings. If you are using the First Home Guarantee with a 5% deposit, a gifted amount covering the full deposit is generally acceptable.

Ongoing Costs During Construction

During the construction phase, you pay interest on the drawn-down portion of the loan, plus rent or mortgage payments on your current residence if you have not yet moved. You also remain responsible for council rates and land tax on the vacant land from the date of settlement, even though the house is not yet built. These holding costs can add up over a 6 to 12 month build period.

Some buyers underestimate the time between land settlement and moving into the completed home. If you settle on the land in July and construction takes 10 months, you are paying for accommodation elsewhere until May of the following year. Budgeting for this overlap is essential, particularly if you are renting while you wait for the build to finish. The interest-only repayments during construction are lower than full principal and interest repayments, but they still need to be factored into your monthly budget alongside your existing housing costs.

Once construction is complete and you move in, your repayments convert to principal and interest, which are higher than the interest-only amount you were paying during the build. Planning for this increase before you sign the contract ensures you can manage the repayments comfortably once the loan converts.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions