Home Loans for House and Land Packages in South East Melbourne, What Lenders Check
House and land packages look straightforward on a display board, but the loan behind one works very differently from a standard purchase. You're not borrowing a lump sum on an existing home. You're funding a block of land, then drawing down in stages as the build progresses, and lenders assess the whole arrangement before a slab is laid.
In South East Melbourne, most established suburbs sit well above the price points where house and land packages are built, so this type of purchase usually puts you outside the approved suburb set and into greenfield or middle-ring areas. That matters for how you structure the borrowing, which schemes you can access, and what the lender needs to see before they'll approve the construction component.
Our team helps buyers across South East Melbourne work through exactly this, comparing construction loan structures across 60+ lenders to find the right fit for the land contract, the build contract and the timeline between them.
Key takeaways
- Construction loans draw down in stages, so interest builds only on funds released.
- A fixed-price building contract with a licensed builder is required by every lender.
- The First Home Owner Grant applies to new builds, not the land purchase price.
How does a house and land package loan actually work?
A house and land package involves two separate contracts: one for the land and one for the construction. The loan that covers them is called a construction loan, and it releases funds in stages as each build milestone is reached, rather than as a single lump sum at settlement.
During the build, you pay interest only on what has been drawn down so far, not on the full approved amount. Once the build reaches practical completion, the loan typically rolls into a standard principal and interest home loan. That structure is what makes construction lending different from every other purchase, and it is what lenders scrutinise most carefully before approving the application.
What do lenders need to approve a house and land package loan?
Lenders assess two things before approval: your financial position, and the package itself. Your borrowing capacity is assessed the same way as any home loan, using the APRA serviceability buffer of 3.0% above your actual rate. What changes is the documentation around the build.
What every lender will ask for:
- › Fixed-price building contract: from a licensed builder, with council-approved plans. A cost-plus or estimated-price contract is not accepted.
- › Land contract: showing the purchase price, the land title status, and any estate covenants or design guidelines that apply.
- › Builder's insurance: domestic building insurance and public liability, current before the first draw.
- › Progress payment schedule: the builder's staged payment breakdown, which the lender compares against industry-standard progress percentages before releasing each draw.
- › Valuation on an "as if complete" basis: the lender values the finished property before approving the full loan, not just the land value at settlement.
A front-loaded builder payment schedule, such as 25% at slab and 35% at frame, will usually be questioned or modified by the lender before funds are released. That is worth flagging with your builder before you sign.
Source: APRA.
Most buyers come to us after they've signed a land contract and chosen a builder, which is too late to change the payment schedule or negotiate the deposit structure. Getting the loan structure sorted before you sign the land contract means the whole process is cleaner, faster, and you avoid the surprises that stop settlements dead.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What government schemes apply to house and land packages?
Several federal and state schemes apply to house and land packages because the finished home is a new dwelling, which is the key eligibility trigger for most of them.
Schemes worth checking for your situation:
- › First Home Guarantee (5% Deposit Scheme): 5% deposit, no LMI, no income test. The price cap is $950,000 for Melbourne postcodes. Most house and land packages in greenfield areas sit near or within this cap, but the combined land-plus-build contract price is what counts.
- › Family Home Guarantee: single parents can buy with a 2% deposit, no LMI. You do not need to be a first home buyer. Price cap is also $950,000 for Melbourne.
- › Victorian First Home Owner Grant:$10,000 for a new home, applied at settlement of the land or at practical completion of the build, depending on the contract structure. The $750,000 cap applies to the contract price, not the finished valuation.
- › First home buyer duty exemption: full exemption where the dutiable value is $600,000 or under, with a concession taper to $750,000. Duty is assessed on the land contract only, not the build contract, so many house and land packages in outer Melbourne qualify for at least partial relief.
- › Help to Buy: the federal shared-equity scheme allows a 2% deposit and the government takes a co-ownership stake of up to 40% on a new home. Income caps are $103,000 for a single buyer and $165,000 for a joint application or single parent in 2026-27. Price cap is $950,000 for Melbourne.
The Victorian Homebuyer Fund is currently closed to new participants, so Help to Buy is the only open shared-equity pathway for buyers here.
Source: Housing Australia and State Revenue Office Victoria.
How much can you borrow for a house and land package in South East Melbourne?
Your borrowing capacity is calculated on the combined contract price: land plus build. The lender adds the APRA buffer of 3.0% to your actual rate when running the serviceability assessment, so your assessed rate is meaningfully higher than the rate you will actually pay during the build.
Construction loans also carry a timing consideration. During the interest-only build period, your repayments are lower than they will be once the loan rolls to principal and interest. Lenders assess your capacity on the principal and interest repayments at the end-loan amount, not the lower interest-only payments during construction.
Deposit requirements depend on which structure you use:
The main deposit routes:
- › Standard loan, 20% deposit: 20% of combined contract price · no LMI · no price cap · any buyer
- › First Home Guarantee: 5% deposit · no LMI · $950,000 cap · first home buyers
- › Family Home Guarantee: 2% deposit · no LMI · $950,000 cap · single parents, not first-home-required
- › Standard loan with LMI: 5% to 10% deposit · LMI premium added · no price cap · any buyer
The lender releases each draw against completed stages, typically slab, frame, lock-up, fit-out and practical completion. Interest charges accumulate only on what has been drawn, so the total interest cost during a build is lower than if the full loan were advanced on day one.
Source: APRA and Housing Australia.
| Get in touch Need help with a house and land package loan? We're a local team who understand how lenders actually assess your situation, not just your rate. We'll compare your options across 60+ lenders to find the right fit.
|
How long does it take to build and settle a house and land package?
The land component settles like any other property purchase, usually within 30 to 90 days of the land contract being signed. Construction then begins once titles register and the build permit is issued, and a standard residential build typically takes six to twelve months from first slab to practical completion.
Total time from signing the land contract to moving in is commonly twelve to eighteen months. Delays are not rare: wet weather, trades availability, council amendments and material shortages all push timelines out. Pre-approval lapses well before that window closes, so formal finance approval is confirmed close to the build's completion, not when you first sign.
When does a house and land package not make sense?
A house and land package suits buyers who are comfortable with a longer timeline and who have the financial capacity to cover holding costs during the build. If you're renting while the house is being built, you're paying rent and construction-period interest simultaneously, and that dual cost can stretch some budgets harder than anticipated.
If the combined contract price sits above $750,000, the Victorian First Home Owner Grant is not available, even if the land component is well below that figure. And if the total price exceeds $950,000, the First Home Guarantee and Help to Buy also fall away. For buyers who need one or more of those schemes to make the numbers work, a package priced just above a cap is a worse outcome than an established property priced just below it.
For most first-home buyers where the schemes are a genuine enabler, a new build is the stronger choice, because the FHOG applies only to new homes, and the duty exemption applies to the land contract only rather than the full dwelling value. That combination of savings is not available on an established purchase.
Where a buyer's budget genuinely needs the grant and the duty savings to work, I'd lean toward a package rather than an established home in most cases. But where the package price is sitting just over a key threshold and the savings disappear, we'd usually model the established property option alongside it before anyone signs anything.
Evelyn Clark · Director, Mortgage & Finance Broker · Chat to Evelyn →
What goes wrong when buyers finance a house and land package?
Where buyers lose ground:
- › Signing before finance is assessed: unconditional land contracts are common in new estates. Signing one without confirmed pre-approval, including the construction component, can leave you committed to a purchase your lender won't approve in its current form.
- › Valuation shortfall at completion: the lender values the finished property at completion, not at contract. If the market softens during a twelve-month build, the "as if complete" valuation can come in below the combined contract price, and the buyer covers the difference in cash.
- › Front-loaded builder schedules: some builders' payment schedules ask for large draws early, before that stage's proportion of work is complete. Lenders inspect before releasing funds, so a mismatched schedule can hold up a progress payment and stall the build.
- › Treating the grant as a deposit contribution: the $10,000 FHOG is paid at or after settlement, not before. It does not replace the deposit the lender requires at land settlement. Buyers who budget it as part of the deposit can find themselves short on settlement day.
How to finance a house and land package in South East Melbourne, step by step
Step 1: Talk to us
We work out what you can borrow across the combined land and build contracts, which schemes apply to your situation, and whether the package you're considering sits inside the key price thresholds before you sign anything.
Step 2: Assess your position and gather your documents
We review your income, existing commitments and deposit, then pull together the documents lenders need: income evidence, the land contract, the fixed-price building contract, the progress payment schedule and the builder's insurance details.
Step 3: Match lenders and submit the application
We identify which lenders on our panel accept the specific builder, the estate's covenant requirements and your contract structure, then prepare and lodge the application with supporting documents to minimise back-and-forth.
Step 4: Manage the draw schedule through to practical completion
We coordinate each progress draw with your builder and the lender's inspection team, so payments are released on time and the build isn't held up waiting for a bank's sign-off.
Frequently Asked Questions
Can I use the First Home Owner Grant on a house and land package?
Yes, the Victorian FHOG of $10,000 applies to house and land packages because the finished home is a new dwelling. The combined contract price must be $750,000 or under, and at least one applicant must be an Australian citizen or permanent resident and live in the home for twelve months.
Do I need two separate loans for the land and the build?
No. A single construction loan covers both: it advances the land amount at settlement, then draws down the build amount in stages. You do not need two separate loan applications, though some lenders structure the land and build components differently internally.
Is the First Home Guarantee available for house and land packages?
Yes, first home buyers can use the First Home Guarantee on a house and land package with a 5% deposit and no LMI. The price cap for Melbourne postcodes is $950,000, which covers the combined land and build contract price.
How do progress payments work during the build?
The lender releases funds to your builder at each completed stage: typically slab, frame, lock-up, fit-out and practical completion. The lender inspects each stage before releasing the next draw, so payment is tied to confirmed progress, not the builder's schedule alone.
Does stamp duty apply to the full package price or just the land?
In Victoria, duty is assessed on the land contract price only, not the build contract. First home buyers may qualify for a full exemption where the land price is $600,000 or under, or a partial concession where it falls between $600,001 and $750,000.
Should I use a mortgage broker or go directly to a lender for a house and land package?
A mortgage broker, every time. Not every lender accepts every builder, every estate covenant structure or every progress payment schedule. A broker who compares across a wide panel finds you a lender whose policy matches your specific package, before you're committed to a contract that a single lender won't approve.
Your Next Steps
Financing a house and land package is more involved than a standard purchase, and the decisions you make before signing the land contract shape every stage that follows. The right loan structure, the right lender for your builder, and a clear picture of which schemes apply to your price point can each make a meaningful difference to what you walk away with at practical completion.
The right lender for a house and land package depends on your situation, and that's a conversation worth having before you commit to a contract. Talk to the EverLend team or call 03 7036 3356, and we'll compare your options across 60+ lenders.
|
External Resources
EverLend · South East Melbourne · Ever Lend Pty Ltd (ACN 625 080 515), authorised under Australian Credit Licence 517192 · General information only - this article does not constitute financial advice. Please consider your own circumstances and seek professional advice before making any financial decisions.
Ready to learn more?
Whatever you need, get in touch and we’ll get the ball rolling. The sooner you reach out, the sooner you’re on your way to securing the right loan!
