First home buyer? How do house and land packages work?

First home buyers can pick up great value with a house and land package. Here's what you need to know.

If you're looking for a shiny new home in a growing suburb, a house and land package can offer excellent value.  However as with all things there are pros and cons to weigh up.

Know how your home will look

On the plus side, developers offer display homes that provide a good idea of how your new home will look. See past the professionally designed décor and focus on whether the layout, the number and size of rooms, and the style of home is what you really need.

You may have opportunities to customise the design to your taste. Be sure your builder understands exactly what you're looking for as any misunderstandings can blow out the cost of changes to the master plan.

Savings on stamp duty

A house and land package can offer savings on stamp duty as duty will only be levied on the value of the vacant lot you buy. It's a big plus for first home buyers, and as an added benefit, many states and territories only offer the First Home Owner Grant (FHOG) on newly built homes.

Calculate how much your stamp duty could be using our calculator here.

Look for transport links and amenities

On the downside, house and land developments are often located in outer suburbs. Be quite sure you are comfortable living a fair distance from the city centre. If you work in the CBD of the more densely populated cities such as Sydney or Melbourne it can add up the costs of a weekday commute - it can make a significant dent in your household budget over time. Having good transport links is essential in any suburb, and public transport can be limited in newer developments.

Look closely too at the available – and planned – amenities in the area. Quality local schools for instance aren't just important if you have children, they can also be a factor underpinning long term capital growth.

Consider home and land package financing

Buying a house and land package puts a number of finance options at your fingertips. You may choose to buy the land with one loan and pay it off before deciding to build with a separate loan. Or you can use a construction loan that drip feeds the loan balance in line with key stages of construction.

Mortgage Choice offers a selection of online guides packed with information for first home buyers. There's even a Guide on construction loans that you can download below.

Advice for house and land packages in Sydney and Melbourne can differ for less densely populated cities. If you have questions, you can talk to your local Mortgage Choice broker for tailored advice on how much you can afford to borrow for your first home and find the loan that is right for your needs. 

FHLDS New Home Incentive

If you’re looking to get a house and land package for your first home, you may be able to do so with a 5% deposit. As part of the Government’s First Home Loan Deposit Scheme (New Homes) guarantee, there are 10,000 places available from 1 July 2021 for first home buyers looking to build a new home. If you purchase a house and land package or land and a separate contract to build a home, you may be eligible to apply for one of the 10,000 places in this scheme. However, it is important to understand that you must start building within 6 months of entering the contract, finish building within 24 months and move into the property within 6 months of the occupancy certificate being issued. 

Read more on the 5% deposit scheme here or speak to your local Mortgage Choice broker to understand if you’ll meet all eligibility requirements today!

It’s also important to note that paying for a home involves more than the deposit. During the purchase process, extra costs may arise and home buyers will need to factor these into their budget. Extra costs may include pest and building, legal fees and more. 

Additionally, if you’re intending to purchase a home and land package, you may be eligible to apply for the First home owner grant and even receive government concessions on your stamp duty.