A land loan finances the purchase of vacant land. Lenders assess the site, location, services, intended use and the borrower’s plan because vacant land can be harder to value or sell than an established home.
Before buying, confirm that the lender accepts the property and intended construction timeframe. The buyer should also check zoning, access, utilities, site costs and contract conditions with the relevant qualified advisers.
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How Land Loans Work
The lender takes security over the land and assesses the proposed loan against its vacant-land policy. Deposit requirements and interest rates vary. Some lenders treat a near-term build differently from land held without a construction plan.
Checks Before Signing
- Confirm zoning and that the intended use is allowed.
- Check legal access, boundaries and registered interests.
- Price site works, utility connections and council requirements.
- Confirm the lender’s acceptable land size and location.
- Make the contract subject to suitable finance and legal advice where appropriate.
Review the lender’s current loan terms. A cheaper block can still produce a higher total project cost when earthworks, access or services are difficult.
Borrower Assessment
The lender considers income, expenses, liabilities and credit history. A Credit Score is only one input. The lender may also need evidence of savings and a realistic plan for construction or holding costs.
Land Loan Or Construction Loan?
A standalone land loan may suit a purchase before plans and a building contract are ready. A combined land-and-construction structure may suit a project that is ready to proceed. Compare approval conditions, valuation timing and the total funds required before recommending either path.
