If you are planning to build immediately, or at least fairly soon, a construction loan might be the best option. Most lenders demand that building on a construction loan must start within a specified time, usually between one and three years, depending on which lender you use and whether the property will be owner-occupied or investment.
This mortgage type allows you to draw down segments of the loan amount in stages as they are needed – for the land purchase and then for the stages of construction – which saves you paying interest on the entire loan amount when you don’t need to be.
If you don’t plan to build immediately, and you want the loan for the land without any time pressures, a vacant land loan may be the best option.
While regular mortgage types can be used for the purchase of vacant land, most lenders also offer vacant land loans. Most will go up to a 30-year loan term and finance up to 90 per cent of the land’s value, and some go as high as 97 per cent loan-to-valuation ratio (LVR). Lenders’ mortgage insurance (LMI) would still most likely be payable on any LVR higher than 80 or 85 per cent, depending on the lender.
The vacant land purchase can be used to increase the equity in your existing home or investment property and, while redraw facilities are usually not available on construction loans, they generally are on land loans.
If you have stumbled upon the perfect position for your dream home, future holiday getaway or retirement oasis, but aren’t ready to plan building it yet, the next step is to speak to an expert about the different types of loans that can finance the purchase.
An MFAA Accredited Mortgage Broker from Atomic Home Loans can certainly assist you in finding the most cost efficient and suitable loan for your situation.
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