Unlock the secrets to house and land loan success

Buying a house and land package means you need two separate loan drawdowns, not one upfront settlement.

The land portion settles first, then construction begins, and your loan gets drawn progressively as the builder completes each stage. That structure affects which lender you choose, how much deposit you need upfront, and whether you can avoid paying double rent and loan repayments during the build. Medical professionals often have the income to qualify but need clarity on timing, particularly if you're transitioning from study to full-time work or waiting for bonus income to show on tax returns.

Why land settles before construction starts

You pay for the land first, then the builder invoices the lender as each construction stage is completed. Land settlement happens like any standard property purchase. You need your deposit plus settlement costs ready to go, and the lender releases funds to complete that transaction. Construction begins after land settlement, and your lender pays the builder directly at each stage, usually five progress payments spread over the build period. You're not writing cheques to the builder.

Consider a doctor relocating to a regional centre who buys a house and land package while still working locum shifts in the city. Land settles in three months, but the build takes another ten months. During that time, they're still renting near their current job. The loan structure needs to account for paying interest on the land loan while still covering rent, without assuming they'll move in immediately.

What happens during the construction phase

Once land settles, you start making repayments on that portion of the loan immediately. Most lenders allow interest-only repayments during construction, which keeps your repayments lower while you're likely still paying rent elsewhere. As each construction stage is approved by the lender's valuer, the next progress payment gets released to the builder. Your loan balance increases with each drawdown, and so do your repayments.

If you're on a variable rate, those repayments adjust as your loan balance grows. If you've fixed the rate, you need to lock it in before land settlement, not when construction finishes. Some lenders let you fix progressively as each stage draws down, but most require you to commit upfront. That timing matters if you're buying now but won't move in for a year.

Deposit requirements and how much you need upfront

You need enough deposit to cover the land and the total contract price, calculated as one package. Lenders assess the combined land and construction value, not just the land. If the total package is valued at the contract price and you're borrowing 90% with Lenders Mortgage Insurance (LMI), your deposit applies to the whole amount. The land portion usually represents around 30% to 50% of the total cost, so that's what you're funding at settlement, but the lender has approved the full loan amount from the start.

Medical professionals often qualify for LMI waivers or reduced LMI depending on the lender, which can lower the deposit needed. Some lenders offer up to 90% without LMI for doctors, while others will lend at 95% but still charge LMI. If you're early in your career and haven't built substantial savings yet, understanding which lenders extend those benefits to house and land packages specifically makes a tangible difference to what you can afford now versus in two years.

How offset accounts work when your loan draws down in stages

An offset account linked to your loan reduces interest from day one, but only on the balance that's been drawn. If you have funds sitting in offset while the loan is still being drawn progressively, the benefit grows as each construction payment is released. Some borrowers park their remaining savings in offset during the build rather than paying extra off the loan, because it gives them flexibility if something changes and they need access to cash.

Not every lender offers full offset on construction loans. Some offer partial offset or redraw only, which doesn't reduce interest daily. If you're used to managing your finances with an offset account and want that feature to continue once construction is complete, check that the loan product supports it during and after the build, not just one or the other.

When to lock in your interest rate

You can't wait until construction finishes to fix your rate. The fixed rate gets locked at or before land settlement, which might be nine to twelve months before you move in. If fixed rates are rising, locking in early protects you. If they're falling, you're stuck with the higher rate for the fixed period. Some lenders let you split the loan so part is fixed and part stays variable, which gives you some protection without committing everything to one rate path.

In a scenario where a specialist is buying a house and land package in a growth corridor outside a major city, they lock in a three-year fixed rate at land settlement because they want certainty while they're also managing practice setup costs. Twelve months later, variable rates have dropped, but their fixed portion stays where it is. They're paying a bit more on that portion now, but they went in with eyes open, knowing the tradeoff was certainty versus flexibility. The variable portion of their split loan tracks down with rate cuts, so they're not entirely locked out of the benefit.

What lenders look at when assessing house and land packages

Lenders want to see a fixed-price building contract with stage payments clearly outlined, and they'll order a valuation based on the finished property, not just the land. That valuation needs to support the total loan amount you're borrowing. If the valuer comes back lower than the contract price, the lender might reduce what they're willing to lend, and you'll need to cover the gap with additional deposit.

Medical professionals with unconventional income structures, such as contractors, locums, or those with a mix of salary and private billing, sometimes find that lenders apply different servicing policies to construction loans than they do to standard home purchases. Some lenders are more flexible, others apply a conservative assessment. If your income has recently increased due to finishing training or moving into a consultant role, showing that income track record upfront when you apply for a home loan helps avoid delays or requests for more documentation mid-process.

How long the build takes and what that means for your finances

Builds typically take nine to twelve months, though delays happen. If your builder runs late, you're still paying interest on the loan and possibly still paying rent. That's why building some buffer into your budget matters. Don't plan your finances assuming you'll move in exactly on schedule.

If you've arranged temporary accommodation assuming a ten-month build and it blows out to fourteen months, those extra months of dual payments add up. Lenders don't adjust your loan or rate because the builder is behind schedule. Your contract is with the builder, and your loan is with the lender. Those two timelines don't automatically sync.

Why some lenders suit house and land packages and others don't

Not every lender handles construction loans the same way. Some have streamlined processes, offer full offset during the build, and don't charge extra fees for progress drawdowns. Others charge a fee every time the valuer inspects a stage, or they don't offer offset until construction is complete. Some lenders don't do house and land packages at all.

Medical professionals sometimes get steered toward a lender that offers profession-based discounts but doesn't handle construction well, and that creates frustration during the build when stage payments are delayed or the process feels clunky. Matching the lender to the loan type, not just to the rate, matters more during a build than it does on a standard purchase. Working with a mortgage broker who knows which lenders handle construction smoothly and which ones don't saves you from finding out the hard way six months into the process.

Frequently Asked Questions