Buying land first and building later has become an increasingly popular entry point into the property market. It provides flexibility, allows for thoughtful planning, and can be more financially manageable—especially for first-home buyers in Australia. But a common question still arises: can a home loan be used to buy land?
Yes. Many Australian lenders offer specific loans for buying land, often called vacant land loans, and in some cases, a home loan can be structured to cover both land and construction, depending on your timeline and intention to build.
This ultimate 2025 guide dives into everything you need to know—from loan types and deposit requirements to grants, risks, and real-life case studies—so you can make confident, well-informed decisions. We will also show you how working with an award-winning Mortgage Broker in Brisbane can get you the best deal.
Understanding Vacant Land Loans
If you’re exploring the property market in Australia, especially as a first-home buyer, you might wonder: Can a home loan be used to buy land? The answer is yes—but not in the same way it’s used to buy an established home. Instead, what you’re typically looking at is a specific kind of home loan called a vacant land loan.
Let’s dive deep into how vacant land loans work, why lenders treat them differently, and what that means for your buying journey.
What Is a Vacant Land Loan?
A vacant land loan is a type of home loan specifically structured for the purchase of land that does not have a residential dwelling built on it yet. This option is ideal for Australians who want to secure a parcel of land now—with the intention of building a home later.
Unlike traditional home loans used to buy a completed property, vacant land loans offer more flexibility in terms of when you build, but they also come with stricter criteria. These loans allow you to lock in a block of land—perhaps in a high-growth corridor, lifestyle acreage, or a new estate—without rushing to construct a home immediately.
Can a Home Loan Be Used to Buy Land Without Building Straight Away?
Yes, a home loan can absolutely be used to buy land, especially through a vacant land loan. However, it’s important to understand that lenders view this type of loan as riskier than a traditional home loan, and this affects how they assess your application.
For buyers who are not ready to build straight away, a vacant land loan gives you breathing room to plan, save, and design your future home without committing to a construction timeline immediately—unless you’re using a government scheme that imposes a deadline (such as the First Home Guarantee Scheme, which requires the building to start within 12 months).
How Much Deposit Do You Need For Land In Australia?
When using a home loan to buy vacant land, most Australian lenders require a deposit of at least 10% to 20% of the land’s purchase price. The exact amount depends on the lender, the type of land you’re buying, and whether you plan to build immediately or later.
Here’s a breakdown:
Deposit Amount | Loan-to-Value Ratio (LVR) | Typical Use Case |
5% | 95% | With First Home Guarantee Scheme (conditions apply) |
10% | 90% | Minimum deposit accepted by most lenders (LMI applies) |
20% | 80% | Ideal deposit to avoid Lenders Mortgage Insurance |
Example 1: Buying land with a 10% Deposit
Marcus from Melbourne found a $300,000 block of land in a new estate. He saved a $30,000 deposit (10%). He was able to qualify for a vacant land loan, but because his deposit was below 20%, the lender added Lenders Mortgage Insurance (LMI) to his loan, increasing the total borrowing cost.
While Marcus was approved, his broker explained that having a 20% deposit would have saved him approximately $6,000 to $8,000 in LMI.
Can You Buy Land with a 5% Deposit?
Yes, a home loan can be used to buy land with just a 5% deposit—but only under specific circumstances. If you’re a first-home buyer eligible for the First Home Guarantee Scheme (FHBG), you may be able to secure a loan with a 5% deposit and no LMI. However, you must meet strict criteria:
- You must start building your home within 12 months of settlement.
- Your land and home must fall under the property price cap in your state (e.g., $750,000 in NSW metro areas in 2025).
- You must intend to live in the property as your principal place of residence
How Land Type and Location Affect Deposit Requirements
The type of land you’re purchasing can also influence your required deposit:
- Residential-zoned land in urban or developing suburbs is easier to finance and typically requires a 10–20% deposit.
- Rural, unserviced, or off-grid land may need a 30–40% deposit or may be ineligible for a home loan altogether.
- Lenders assess risk based on whether the land has access to utilities, roads, and council zoning approvals for residential construction.
Example 2: Buying Regional Land with a Larger Deposit
Samantha and James found 2 hectares of semi-rural land in regional Victoria. The land was unserviced and required off-grid utilities. Their lender required a 30% deposit due to the extra risk. On their $200,000 purchase, they needed to contribute $60,000 upfront, which they managed by drawing on their savings and superannuation under the First Home Super Saver Scheme (FHSSS).
Deposit Timing and Additional Costs to Budget For
Remember that your deposit is just one part of the upfront costs. When buying land, you should also budget for:
- Stamp duty (though first-home buyers often receive exemptions or concessions)
- Legal and conveyancing fees
- Loan application fees
- Council and utility connection costs (post-purchase)
So, can a home loan be used to buy land with a small deposit? Yes, but with caveats. The more you save, the better your loan terms will be. A 20% deposit remains the gold standard—it reduces your risk, eliminates LMI, and gives you greater borrowing flexibility.
But if you’re eligible for government schemes like the First Home Guarantee or FHSSS, a 5% deposit may be enough to get you started—especially when buying both land and building within the timeline required.
Before committing to a block of land, speak with a mortgage broker who understands the nuances of land-only lending and can help you structure your loan to get the best outcome.
Want help finding out how much you need for your dream block of land? Contact our team at Hunter Galloway—we specialise in guiding first-home buyers every step of the way.
Why Are Vacant Land Loans Considered Riskier?
Lenders assess vacant land loans with more caution than standard home loans. Here’s why:
1. No Dwelling = Less Security
Traditional home loans are secured against the value of a completed home. If a borrower defaults, the bank can sell the house to recoup losses. But with a vacant land loan, there’s no physical structure to add value or security. Land alone is less marketable and harder to sell quickly in the event of default, especially if it’s located in a rural or regional area.
2. Market Volatility
Undeveloped land can be more susceptible to market swings than houses. While established properties tend to retain or gain value due to land plus building value, vacant land prices can fluctuate more drastically based on supply, demand, and development plans in the area.
For example, if infrastructure projects in the area are delayed or cancelled, land values may stall or even drop—leaving lenders (and buyers) exposed to losses.
3. Delays or Abandonment of Construction
Life circumstances can change—plans to build can be delayed for years or sometimes never eventuate. This uncertainty makes lenders cautious, especially if you haven’t yet signed a construction contract or obtained council approvals.
4. Limited Buyer Pool
Vacant land, particularly in less developed areas, has a narrower appeal to future buyers. This impacts resale value and lender confidence. Some lenders may even decline loans for land in remote or hard-to-develop areas.
How Lenders Compensate For Vacant Land Risk
Because of these perceived risks, banks and lenders apply more conservative lending policies when you apply for a loan to buy vacant land. Here’s what you can expect:
Higher Deposit Requirements
While a standard home loan might only require a 5%–10% deposit, most vacant land loans will require at least a 10%–20% deposit. The higher your deposit, the lower the risk to the bank—and the better your chances of approval.
Tip: If you’re eligible for the First Home Guarantee Scheme, you may be able to buy land with just a 5% deposit and avoid paying Lenders Mortgage Insurance (LMI), provided you build within 12 months.
Stricter Lending Criteria To Use A Home Loan To Buy Land
Lenders will look more closely at:
- Your income and employment history
- Your credit score
- The location and zoning of the land
- Your plans for construction (including timelines and contracts if available)
Shorter Maximum Loan Terms
Some lenders may limit the term of a vacant land loan to 20–25 years instead of 30, especially if no building is planned soon. This could increase your monthly repayments.
Interest-Only Options
To help you manage repayments before building begins, lenders often offer an interest-only period—typically for 1–5 years. During this time, you only repay the interest on the loan, keeping costs lower while you plan your build.
What Types of Land Are Eligible?
Not all blocks of land are created equal in the eyes of lenders. To use a home loan for land, the land generally needs to be:
- Zoned for residential use (check with your local council)
- Accessible via road
- Within proximity to utilities (water, electricity, sewage)
Rural blocks, steep land, or unserviced plots may be financed under stricter conditions or rejected entirely by some lenders.
When Is a Vacant Land Loan the Right Option?
A vacant land loan might be the perfect fit if:
- You’ve found the perfect block of land but aren’t ready to build
- You want to secure a site while prices are still low
- You prefer to take your time designing your dream home
- You plan to build within 1–2 years and have a realistic strategy to get there
In contrast, if you’re ready to build immediately, a construction loan or house and land package might be more appropriate—and easier to manage with bundled contracts.
Which Loan Is Best For Buying Land?
As we’ve mentioned before, a vacant land loan is ideal if you’re not ready to build straight away but want to secure a block of land now. It’s a standard loan that gives you the funds to purchase land only without tying you into an immediate building contract.
Key Features:
- Requires a 10%–20% deposit (some lenders may accept 5% under government schemes).
- Usually, it has stricter lending criteria, including land zoning, size, and utility access.
- Repayments typically start immediately and may be interest-only initially.
2. Construction Loan – Best if You're Ready to Build Now
A construction loan is designed for buyers who plan to buy land and start building their homes immediately. This type of loan pays the builder in instalments as construction progresses.
Key Features:
- Requires a building contract with fixed costs and timelines.
- Funds are released in stages, reducing interest costs early on.
- Transitions into a regular home loan once construction is complete.
3. House and Land Package Loan – Best for Simplicity
House and land package loans combine the land and build into one package with a single contract. This can streamline the process, especially for buyers who prefer less complexity and more predictability.
Key Features:
- Typically, it involves one builder and one loan.
- Often promoted by developers in new estates.
- May offer incentives like discounts or rebates.
So, Which Loan Is Right for You?
To answer the question, “Can a home loan be used to buy land?”—yes, but the best loan type depends on your timing and goals:
- If you’re not building immediately → Vacant Land Loan
- If you’re building now → Construction Loan
- If you want simplicity and turnkey build → House and Land Package Loan
Each loan has its pros and cons. The right one will align with your timeline, financial situation, and comfort level with risk and planning. Speaking with a mortgage broker—like our team at Hunter Galloway—can help you evaluate your options, access government grants, and secure the most suitable financing for your dream block.
Case Study 1: Vacant Land Loan in Brisbane
- Loan Type: Vacant Land Loan
- Land Price: $250,000
- Deposit: $50,000 (20%)
Emily, a first-time buyer, had her eye on a corner block in an up-and-coming suburb just outside of Brisbane. With plans to eventually build her dream home, she wanted to secure a block early while land prices were still relatively affordable. However, she wasn’t ready to start construction immediately, so she needed a loan strategy that would give her flexibility and room to breathe.
That’s when she reached out to a mortgage broker, who became instrumental in helping her navigate the options. The broker explained that banks often treat vacant land loans differently than standard home loans, with stricter lending criteria and shorter loan terms. Fortunately, her broker knew which lenders were more flexible when it came to land purchases and helped her get pre-approved with a competitive interest-only loan.
This structure allowed Emily to keep her repayments low while continuing to grow her savings for the future build. The broker also negotiated a loan with no early repayment penalties and helped ensure the valuation aligned with the market.
Over the next two years, the area’s popularity grew, infrastructure projects were announced nearby, and property values rose. Emily’s land appreciated by approximately 15%, increasing her equity significantly.
When she was ready to build, she turned to the same mortgage broker again. With her increased equity and the groundwork already laid, her broker helped her refinance the land loan and bundle in construction finance, all without needing a second separate loan or triggering extra fees.
By working with a mortgage broker, Emily was able to:
- Get access to lenders that suited her specific goals.
- Secure a flexible interest-only loan that worked with her timeline.
- Navigate valuation challenges and get a great deal.
- Refinance smoothly into a construction loan with no extra deposit needed.
Today, Emily is building her home with a strong financial foundation — and no regrets about buying early.
Pros And Cons Of Getting A Home Loan To Buy Land
Pros of Using a Home Loan to Buy Land
1. Lock in Land at Current Market Value
Purchasing land now allows you to secure it at today’s prices, potentially benefiting from future appreciation. This strategy is especially advantageous in rapidly growing areas where land values are expected to rise.
2. Tailor Your Home Design
Owning land provides the freedom to design and build a home that suits your specific needs and preferences. This flexibility is ideal for those who have a clear vision of their dream home.
3. Access to Government Schemes
First-home buyers may be eligible for various government incentives, such as the First Home Owner Grant (FHOG) and stamp duty concessions, which can significantly reduce the overall cost of purchasing land and building a home.
4. Potential Equity Growth
As land appreciates over time, you may build equity even before construction begins. This equity can be beneficial if you decide to refinance or need additional funds for building.
Cons of Using a Home Loan to Buy Land
1. Loan Repayments Before Construction
You’ll need to start repaying the loan immediately after purchasing the land, even if construction hasn’t commenced. This situation requires careful financial planning to manage repayments alongside other expenses.
2. Land May Not Be Build-Ready
Not all land is immediately suitable for building. Issues such as lack of infrastructure, zoning restrictions, or the need for additional approvals can delay construction and increase costs.
3. Government Grant Timelines
Many government incentives come with strict timelines. For instance, to qualify for certain grants, you may need to commence construction within a specified period after purchasing the land.
4. Rising Construction Costs
Delays in building can lead to increased construction costs due to inflation and changes in material prices. It’s crucial to factor in potential cost escalations when planning your budget.
Using a home loan to purchase land offers the opportunity to create a personalised living space and potentially benefit from property appreciation. However, it’s essential to be aware of the financial commitments and potential challenges involved. Thorough research, careful planning, and consultation with financial and real estate professionals can help ensure a successful land purchase and home-building experience.
Government Grants and Assistance To Buy Land
To support first-home buyers in this journey, various government grants and assistance programs are available in 2025. These initiatives aim to make land acquisition and home construction more accessible and affordable
First Home Owner Grant (FHOG)
The FHOG is a national scheme administered by individual states and territories that provides a one-off grant to eligible first-home buyers purchasing or building a new home. While the grant primarily supports the construction phase, it indirectly assists in land acquisition by easing overall costs.
State-Specific FHOG Details:
- Queensland (QLD): Offers a $30,000 grant for new homes valued up to $750,000, applicable for contracts signed between 20 November 2023 and 30 June 2025.
- New South Wales (NSW): Provides a $10,000 grant for new homes valued up to $750,000.
- South Australia (SA): Offers a $15,000 grant for new homes with no property value cap.
- Western Australia (WA): Provides a $10,000 grant for new homes valued up to $750,000 in southern regions and up to $1 million in northern regions.
Stamp Duty Concessions
Stamp duty can be a substantial expense when purchasing property. Fortunately, several states offer concessions or exemptions for first-home buyers:
- Queensland: As of May 2025, first-home buyers purchasing vacant land valued under $350,000 are exempt from stamp duty.
- New South Wales: Provides full stamp duty exemption for new or existing homes under $800,000 and concessions for homes valued between $800,000 and $1,000,000.
- Western Australia: Offers stamp duty exemptions for vacant land purchases up to $350,000 and concessions for land valued between $350,000 and $450,000.
First Home Guarantee Scheme (FHBG)
The FHBG allows eligible first-home buyers to purchase a home with as little as a 5% deposit without paying Lenders Mortgage Insurance (LMI). While the scheme primarily targets home purchases, it can apply to land purchases if you intend to build your home within 12 months.
Key Points:
- Deposit Requirement: Minimum of 5% of the property’s value.
- Eligibility: Must be a first-home buyer intending to live in the property.
Property Price Caps: Vary by region; for example, up to $750,000 in NSW.
First Home Super Saver Scheme (FHSSS)
The FHSSS enables first-home buyers to save for a home deposit within their superannuation fund, benefiting from concessional tax treatment. You can withdraw up to $50,000 (or $100,000 for couples) of voluntary contributions to use toward your first home.
Key Points:
- Contribution Limits: Up to $15,000 per financial year, with a total limit of $50,000.
- Eligibility: Must be a first-home buyer intending to live in the property.
- Timeframe: Must sign a contract to purchase or build a home within 12 months of withdrawal.
So, can a home loan be used to buy land? Absolutely. With the support of various government grants and assistance programs, first-home buyers in Australia have multiple avenues to make land ownership and home construction more attainable. By leveraging these initiatives, you can reduce upfront costs, minimise ongoing expenses, and move closer to building your dream home.
Case Study 2: Liam & Sarah – House and Land Package Loan in Sydney, NSW
- Loan Type: House and Land Package Loan
- Total cost: $600,000
- Deposit: $30,000 (5%)
- Support: First Home Guarantee Scheme
Strategy:
Liam and Sarah, a young couple living in Sydney’s western suburbs, were eager to break into the property market. After attending multiple open homes and facing stiff competition from investors and upgraders, they decided a house and land package was their best shot at securing a brand-new home without overstretching their budget.
However, with only $30,000 in savings, they weren’t sure if that would be enough for a deposit—especially when many lenders require a 20% deposit to avoid Lenders Mortgage Insurance (LMI). Feeling overwhelmed, they decided to work with a mortgage broker who specialises in helping first-home buyers.
That decision turned out to be a game-changer.
Their mortgage broker quickly introduced them to the First Home Guarantee scheme, which allows eligible first-home buyers to purchase a home with as little as a 5% deposit without paying LMI. The broker confirmed their eligibility, guided them through the application process, and helped them secure a lender that participated in the scheme.
More importantly, the broker:
- Ensured their house and land package met the requirements of the scheme.
- Worked with the builder and lender to coordinate drawdowns for the construction loan.
- Helped lock in a fixed-price building contract, which protected them from surprise cost blowouts during construction.
- Secured a loan structure with staged payments and competitive fixed rates for budgeting certainty.
During construction, Liam and Sarah made another smart move—they chose to live with Sarah’s parents rent-free. This allowed them to reduce expenses, save more money, and avoid taking out personal loans or using credit cards to cover costs during the build.
Step-by-Step Guide to Buying Land in Australia (2025)
Step 1: Define Your Purpose and Budget
Begin by clarifying your intentions: Are you purchasing land to build your primary residence, an investment property, or for future development? Your purpose will influence the type of loan you require and your eligibility for government grants.
Next, assess your financial capacity. Utilise tools like our deposit calculator to estimate your borrowing power and determine a realistic budget for both land acquisition and construction. Remember to factor in additional costs such as stamp duty, legal fees, and potential land development expenses.
Step 2: Check Eligibility for Government Schemes
As we have mentioned before, Australia offers several government initiatives to assist first-home buyers:
- First Home Owner Grant (FHOG): Provides a one-off payment to eligible first-home buyers building a new home.
- First Home Guarantee: Allows eligible buyers to purchase a home with a deposit as low as 5% without paying Lenders Mortgage Insurance (LMI).
- Stamp Duty Concessions: Various states offer reductions or exemptions on stamp duty for first-home buyers.
- First Home Super Saver Scheme (FHSSS): Enables first-home buyers to save for a home deposit within their superannuation fund.
Eligibility criteria and benefits vary by state and individual circumstances.
Step 3: Secure Loan Pre-Approval
Obtaining pre-approval for a home loan provides a clear understanding of your borrowing capacity and demonstrates to sellers that you’re a serious buyer. This step is crucial before making any offers on land.
When applying for pre-approval:
- Provide documentation of your income, expenses, assets, and liabilities.
- Discuss with lenders the specifics of land loans or construction loans, as requirements may differ from standard home loans.
- Inquire about the Loan-to-Value Ratio (LVR) limits and whether LMI applies.
Step 4: Engage in Early Builder Consultation
Even if you don’t plan to build immediately, consulting with builders early can be beneficial:
- Obtain preliminary designs and quotes to understand potential construction costs.
- Some lenders require a signed building contract within a specific timeframe (e.g., 12 months) as a condition of the loan.
- Early consultation can help identify any site-specific challenges that may affect construction.
Step 5: Conduct Thorough Land Due Diligence
Before purchasing land, ensure you:
- Check Zoning and Land Use Regulations: Verify that the land is zoned appropriately for your intended use.
- Assess Infrastructure Availability: Determine the availability of essential services like water, electricity, sewage, and road access.
- Review Land Covenants and Restrictions: Identify any covenants or restrictions that may impact your building plans.
- Obtain a Land Survey: Confirm the exact boundaries and identify any easements or encroachments.
Engaging professionals such as conveyancers or solicitors can assist in navigating these checks.
Step 6: Make an Offer and Sign the Contract
Once you’ve identified suitable land:
- Negotiate the Purchase Price: Engage in discussions with the seller to agree on a fair price.
- Sign the Contract of Sale: Ensure the contract includes any conditions, such as subject to finance or satisfactory land inspections.
- Pay the Deposit: Typically, a deposit (e.g., 10% of the purchase price) is required upon signing the contract.
Step 7: Finalise the Loan and Settlement
After signing the contract:
- Finalise Loan Approval: Submit the signed contract to your lender to proceed from pre-approval to formal approval.
- Arrange for Settlement: Coordinate with your conveyancer or solicitor to complete the settlement process, which includes transferring ownership and paying the remaining balance.
- Register the Title: Ensure the land title is registered in your name with the relevant state or territory authority.
Step 8: Plan for Construction
With land ownership secured:
- Finalise Building Plans: Work with your chosen builder to complete detailed designs and obtain necessary approvals.
- Apply for a Construction Loan: If not already arranged, secure financing for the building phase.
- Commence Construction: Begin building within any timeframes stipulated by your lender or government grant conditions.
Frequently Asked Questions
Yes. Home loans can be used to purchase vacant land. These are known as vacant land loans or land-only loans and are offered by many Australian lenders. You can also use a combined land and construction loan if you intend to build shortly after purchasing the land.
Most lenders require a minimum deposit of 10%–20% for a land-only loan. If you're eligible for the First Home Guarantee, you may only need 5% with no Lenders Mortgage Insurance (LMI).
Yes, if your deposit is less than 20% and you don't qualify for a government scheme like the First Home Guarantee, you'll likely need to pay LMI.
Yes, you can withdraw up to $50,000 from your super to use as a deposit, but you must sign a building contract within 12 months of the withdrawal.
Not always. With a vacant land loan, you may delay building, but some government schemes or lender conditions may require you to start construction within 12–24 months.
Yes. Many buyers take out a land loan first and later apply for a construction loan. Some lenders may require you to use the same institution for both loans.
You may lose eligibility for grants or benefits like the FHOG or First Home Guarantee. Always check timelines before committing.
Yes. You'll need to check:
- Zoning regulations
- Utility connections (power, water, sewerage)
- Land covenants and easements
- Soil quality and bushfire/flood risks
Yes, but lenders often see rural or regional land as a higher risk. They may require a higher deposit, shorter loan term, or even refuse finance, depending on the location and services available.
Yes, but many states offer stamp duty concessions or exemptions for first-home buyers purchasing vacant land below a certain value threshold. For example, QLD waives stamp duty on vacant land valued under $300,000 (from May 2025).
Next Steps And Getting Your Home Loan
Our team at Hunter Galloway is here to help you buy a home in Australia. Unlike other mortgage brokers who are just one-person operations, we have an entire team of experts dedicated to helping make your home loan journey as simple as possible.
If you want to get started, please give us a call on 1300 088 065 or book a free assessment online to see how we can help.
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