Whether you are buying land as an investment, for an immediate build or for a ‘one day I will build and live here’ dream, a vacant-land purchase can be funded by a range of mortgages.
If you are planning to build immediately, or in the near future, a construction loan might be the best option. Most lenders demand that building on a construction loan must start within a particular timeframe, usually between one and three years, and this can all depend on your choice of lender and whether the property will be investment or owner occupied.
This mortgage type allows you to draw down the loan in stages as and when they are needed – for the land purchase and then for the stages of construction – which saves you paying interest on the entire loan amount when you don’t need to be.
Hot tip: If you are purchasing a house and land package, ensure that you settle the land portion first to ensure that you only pay stamp duty on the house and not on the land.
If you don’t plan to build immediately, and you want the loan for the land without any time pressures, a vacant land loan may be the best option.
While regular mortgage types can be used for the purchase of vacant land, some lenders can also offer vacant land specific loans. Most will go up to a 30-year loan term and finance up to 90 per cent of the land’s value, and some go as high as 97 per cent LVR. LMI would still most likely be payable on any LVR higher than 80 or 85 per cent, depending on the lender.
The vacant land purchase can be used to increase the equity in your existing home or investment property and, whilst redraw facilities are usually available on vacant land loans, they are generally not available on construction loans.
If you have stumbled upon the perfect position for your dream home, future holiday getaway or retirement oasis, but aren’t ready to plan building it yet, the next step is to speak to an expert about the different types of loans that can finance the purchase.
Do you need advice? Call Chris today on 0490 075 039 or send an email to info@chardon.com.au