Should you apply a vacant land loan or construction loan?

Whether you are buying a vacant land for investment or maybe one day in the future you want to build your own house and live there, a vacant land purchase can be financed through a range of lenders.

If you are planning to build immediately or very soon, a construction loan might be the right option. Depending on the lender and whether the property will be owner occupier or investment, lenders will normally need the construction to start within a specified time, usually between 1 – 3 years. A construction loan is drawn down as progressive payments of the loan amount at various construction stages such as slab, lock up etc.

If you decided to delay building, then the vacant land loan may be a more suitable option for you. Most lenders do offer a vacant land loan with up to 30 years loan term with LVR up to 90% of Land value and some lenders can finance further up to 97% of LVR. Depending on the lender, normally if the LVR (loan to valuation ratio) is higher than 80% or 85% some lenders required the borrower to pay LMI (Lender’s mortgage insurance)

If you have found the right location for your dream home and you are not ready to build on the land, the next step is to speak to Kevin on 0415820016 about the different types of loans that can finance the purchase.

Disclaimer: We recommend that you seek independent financial and taxation advice before acting on any information in this newsletter. It contains general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances. Your full financial situation will need to be reviewed prior to acceptance of any offer or product. Interest rates are subject to change without notice. Lenders terms, conditions, fees & charges apply.