15th July, 2017 | 4 minutes

First home buyers: Is a house and land package right for you?

by Shannon Clarke
Finance Geek

For many Australians buying their first home, finding the right property for the right price can sometimes feel next to impossible. A house and land package might help to overcome this obstacle by providing an affordable, brand-new home, often requiring a smaller deposit. Here, we look at what’s involved as well as the pros and cons

 

How house and land packages differ

Compared to other options – such as purchasing an established property or buying land – the key difference of house and land packages is in the financing.

The financing process usually consists of two steps: a mortgage for the land and then a construction loan for building the house. A construction loan is taken out in stages, meaning you ‘draw down’ on a pre-agreed loan amount and only pay interest on the amount needed for each phase of the build. These two loans are usually bundled together, but not always, so it pays to do some research and consider your loan options.

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First home buyers: Is a house and land package right for you?

House and land packages: Advantages and disadvantages

Make sure to review the pros and cons of buying a house and land package as your first home. They can include:

Pros

  • The First Home Owner Grant: The government scheme awards first home buyers a one-off lump sum payment for buying property. The details vary between each state and territory, but in most cases the First Home Owner Grant generally only applies to new builds. This changes regularly so it’s best to check to see what applies to your area.
  • Potential savings on stamp duty: Stamp duty is a state tax applied and payable on the purchase of property. A house and land package may offer stamp duty savings as duty will only be calculated on the value of the vacant lot. First home buyers might also be eligible for a stamp duty exemption or concession.
  • Customisation: You can choose the home you’d like to build and customise it to suit your needs.
  • Fewer maintenance costs: As you’ll be getting a new home with a warranty, your maintenance costs in the early years will likely be less than an established home.

Cons

  • Potential lack of infrastructure and longer commutes: Transport infrastructure might be lacking (or in development), so it’s a good idea to check how this will affect your commute and lifestyle.
  • Inflated costs: There are sometimes built-in marketing costs and commissions with house and land packages that aren’t always declared, which may push up the price of your new home.

House and land packages can offer many benefits, particularly for first-time home buyers. By doing your homework, checking the options available in your area, and weighing up the pros and cons, you can decide if it’s the right option for your needs.

 

Any advice provided in this content is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice we give you, having regard to your personal situation, before acting on our advice or purchasing any product.

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