House and land packages require a different lending approach than buying an established home.
Your lender releases funds in two stages: once when you settle on the land, and again when construction completes. That split structure changes how interest is calculated, when repayments begin, and what your lender wants to see during home loan pre-approval.
How Lenders Structure Finance for House and Land Packages
Most lenders treat house and land as two separate contracts under one loan facility. You settle on the land first, then the builder draws down construction funds progressively as each stage completes. During construction, you typically pay interest only on the land component and any funds released to the builder. Full principal and interest repayments don't begin until the house reaches practical completion and you receive the keys.
Consider a buyer purchasing a house and land package in Miami with a land price at the current suburb median and a build contract around $450,000. The lender would release funds for the land at settlement, then stage payments to the builder over six to nine months. For those first months, the buyer pays interest only on whatever has been drawn down, not the full loan amount. Once the certificate of occupancy is issued, the loan converts to principal and interest repayments based on the total amount borrowed.
When to Seek Pre-Approval for a House and Land Purchase
Apply for pre-approval before you sign the land contract. Builders and developers often require proof of finance within 14 to 21 days of signing, and conditional approval from your lender satisfies that requirement. Pre-approval also confirms your borrowing capacity, so you know which house and land combinations fall within reach.
A variable rate loan gives you flexibility if construction timelines shift or if you want to make extra repayments once you move in. A fixed rate locks in certainty during the build phase, which can help if you're managing a tight budget. Some buyers use a split loan, fixing a portion for stability and keeping the rest variable for offset access.
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What Lenders Assess During the Application
Lenders assess your income, living expenses, existing debts, and deposit size. They also review the land contract, the building contract, and the builder's credentials. If the builder isn't on the lender's approved list, or if the contract includes non-standard clauses, some lenders will decline the application or ask for amendments.
Your loan to value ratio matters during construction. If you're borrowing more than 80% of the combined land and build cost, you'll pay Lenders Mortgage Insurance. LMI is calculated on the total loan amount and added to your loan balance unless you pay it upfront. In Miami, where house and land packages often sit just above the median for the broader Gold Coast region, a 10% deposit might not be enough to avoid LMI depending on the total contract value.
Managing Interest Costs During the Build Phase
Interest accrues from the moment funds are released. If your land settles in March and construction completes in November, you'll pay interest for eight months before you move in. That interest is capitalised or paid from your own funds, depending on how your lender structures the loan.
An offset account linked to your owner occupied home loan can reduce the interest you pay during construction. If you keep your savings in the offset, the balance reduces the portion of your loan that accrues interest. Not all construction loan products offer a linked offset, so confirm this feature when comparing home loan options.
How Miami's Location Affects Loan Serviceability
Miami sits between Burleigh Heads and Nobby Beach, close to the beach and within reach of the M1. Lenders view the suburb favourably because of its proximity to schools, Stockland Burleigh Heads, and Miami State High School. Serviceability is rarely affected by location alone, but properties in well-connected suburbs with strong demand tend to support higher valuations, which can improve your loan to value ratio.
If you're applying as a first home buyer, the First Home Owner Grant may be available depending on the build contract value and whether you've owned property before. Check current thresholds before you sign, as these grants can reduce the deposit you need to bring to settlement. For more guidance on first home buyer support, visit our first home buyers page.
What Happens If Construction Delays Push Past Your Rate Lock
If you've fixed your interest rate and construction delays extend beyond the rate lock expiry, your lender may allow an extension or move you to a variable rate until completion. Rate lock periods typically run for six months, which aligns with most build timelines. If your builder quotes a longer construction period, discuss an extended rate lock with your mortgage broker in Miami before submitting your application.
Delays can also affect your settlement timeline on the land. If the developer postpones the land title registration, your lender won't release funds until the title is ready. That can push back your entire construction schedule, so confirm the expected title date with the developer before you commit.
Choosing Between Fixed, Variable, or Split Rate Structures
A variable rate gives you the flexibility to make extra repayments and access an offset account, which can help during the construction phase when your income might fluctuate or when you're managing two sets of payments if you're renting elsewhere. A fixed rate provides certainty, particularly if you're concerned about interest rate movements during the build.
Some buyers split the loan, fixing half and leaving the other half variable. This approach balances certainty with flexibility and allows you to direct savings into an offset account to reduce interest on the variable portion. In our experience, buyers who plan to make extra repayments after moving in tend to favour variable or split structures over fully fixed loans.
Call one of our team or book an appointment at a time that works for you. We'll review your deposit, compare home loan rates from lenders who support house and land packages, and make sure your application aligns with your build timeline and the contracts you're signing.
Frequently Asked Questions
When should I apply for finance for a house and land package?
Apply for pre-approval before signing the land contract. Builders and developers usually require proof of finance within 14 to 21 days, and conditional approval from your lender meets that requirement.
Do I pay the full loan repayment during construction?
No. During construction, you typically pay interest only on the land and any funds released to the builder. Full principal and interest repayments start once construction completes and you receive the certificate of occupancy.
Can I use an offset account during the construction phase?
Some lenders offer a linked offset account with construction loans, which can reduce the interest you pay while the house is being built. Not all loan products include this feature, so confirm it when comparing options.
What happens if construction takes longer than expected?
If you've locked in a fixed rate and construction delays push past the expiry, your lender may extend the rate lock or move you to a variable rate until completion. Discuss extended rate lock periods if your builder quotes a longer timeline.
Will I need to pay Lenders Mortgage Insurance on a house and land package?
If you're borrowing more than 80% of the combined land and build cost, you'll pay Lenders Mortgage Insurance. LMI is calculated on the total loan amount and can be added to your loan balance or paid upfront.
