Avoid These 5 Mistakes When Buying a House and Land Package

Signing the Land Contract Before Understanding Your Total Borrowing Capacity

Many first home buyers sign a land contract without confirming how much a lender will approve across both the land and the construction loan. The land purchase settles first, which means you need enough borrowing capacity to cover the land price, stamp duty, and legal costs upfront, while also holding approval for the construction phase that follows months later.

Consider a buyer who purchases land in the Moreton Bay region for $280,000 and plans a $420,000 build. They secure pre-approval for $700,000 in total but did not account for the fact that land settlement costs include stamp duty, conveyancing, and connection fees totalling around $15,000. When the land settles, they draw down $295,000 from their loan. The lender then reassesses their capacity before approving the construction loan, and because their income has not changed but their debt has increased, the construction approval comes back at $380,000 instead of the expected $420,000. They are left with a land holding and no way to build the home they planned.

The solution is to seek full pre-approval for both the land and construction components before you sign any contract. Lenders assess borrowing capacity differently during construction, and understanding how your debt and income position will look at each stage prevents situations where you own land but cannot proceed with the build. This is particularly relevant in Queensland, where land prices in growth corridors such as Caboolture, Ripley, and Flagstone have risen, and even modest land parcels now require significant upfront capital.

Assuming the First Home Owner Grant Will Cover Your Deposit

The Queensland First Home Owner Grant of $30,000 applies only to new homes valued under $750,000, and only for contracts signed before 30 June 2026. It does not pay for the land, and it does not replace genuine savings. Lenders require you to demonstrate that you have saved or accumulated a portion of your deposit independently, and gifted funds or the grant itself do not always meet that requirement.

Most lenders expect at least 5% of the property value to come from genuine savings held for a minimum of three months. If you are using the Australian Government 5% Deposit Scheme, you still need to provide that 5% as a combination of savings and, in some cases, the grant. If your total purchase price is $700,000 and your deposit is only 5%, that is $35,000. The grant contributes $30,000, but you must still provide $5,000 in genuine savings, plus additional funds for settlement costs including conveyancing, inspections, and loan establishment fees.

Some buyers believe the grant will arrive in time to cover land settlement, but the grant is typically paid at the earlier of construction commencement or completion, not at land settlement. This creates a gap where buyers need access to funds they assumed would be available from the grant. Work with your broker to map out exactly when each cost is due and where each dollar is coming from.

Missing Out on Queensland Stamp Duty Concessions for New Builds

From 1 May 2025, Queensland introduced a full transfer duty concession for new homes on residential land with no price cap. This applies to house and land packages where the property is classified as new residential land at settlement. If you qualify as a first home buyer and your package meets the definition of a new home, you pay no stamp duty on the land component, which can represent a saving of tens of thousands of dollars.

The eligibility criteria require that you have not previously owned property in Australia, you or your spouse intend to occupy the property as your principal place of residence for at least 12 months, and the land is classified as new residential land under the Duties Act. Not all land sold as part of a house and land package meets this definition, particularly if the land was previously subdivided or titled more than 12 months before your contract. Confirm with your conveyancer or the developer whether the land qualifies before assuming the concession applies.

In areas such as Greater Brisbane, the Sunshine Coast, and the Gold Coast, where land values often exceed $300,000, the difference between paying full stamp duty and accessing the concession can exceed $10,000. Buyers who do not confirm their eligibility before signing the contract may find themselves liable for transfer duty they did not budget for, and in some cases this amount exceeds their available deposit buffer.

Choosing the Wrong Loan Structure for a Two-Stage Settlement

House and land packages settle in two stages: first the land, then the construction loan. Some buyers take out a standard home loan for the land and attempt to add a construction facility later, only to discover their lender does not offer construction loans or will not approve the second stage without a full reassessment. This creates delays, additional costs, and in some cases, a need to refinance before construction can begin.

A construction loan is structured to release funds in stages as the build progresses, which means interest is charged only on the amount drawn down at each stage rather than the full loan amount from day one. During construction, most lenders allow interest-only repayments, which reduces the monthly cost while the property is being built and you may still be paying rent elsewhere. If you take out a standard loan for the land and a separate construction loan later, you may end up paying interest on the full land amount plus establishment fees for two separate loans.

The correct approach is to arrange a single construction loan that covers both the land purchase and the build. Your broker structures the loan so that the land component settles first, and the construction facility is held in reserve and drawn down progressively. This avoids double assessments, reduces fees, and ensures your repayments remain manageable during the build period. It also allows you to lock in a portion of your loan at a fixed rate if you prefer certainty once construction is complete.

Not Accounting for the Time Between Land Settlement and Construction Completion

Once the land settles, you begin making loan repayments immediately, even though construction has not started. Most builds take between six and 12 months to complete, and during that time you are often paying both your loan repayments and rent on your current property. Many first home buyers underestimate this double cost and find their savings depleted before they can move in.

If you are paying $450 per week in rent and $380 per week in loan repayments during a nine-month build, that is an additional $13,000 in holding costs that were not part of your original budget. Some buyers also face delays caused by weather, material shortages, or builder scheduling, which extends the construction period and increases the total cost. Lenders typically allow interest-only repayments during construction, but you need to factor in rent, loan interest, and any ongoing costs such as insurance or council rates on the land.

Before committing to a house and land package, calculate how long you can sustain dual payments and whether you have a buffer to cover delays. If your current lease ends before construction is complete, you may need to negotiate a short-term rental extension or move into temporary accommodation, both of which add further cost. Buyers who plan for a nine-month timeline and budget for 12 months are less likely to face financial pressure if the build runs over.

Overlooking How Lenders Assess Construction Loan Applications

Lenders assess construction loans differently to standard home loan applications. They require a full copy of the building contract, including specifications, the fixed price, and the builder's insurance and licensing details. They also assess the builder's financial stability, particularly if the builder is a smaller or newer company. If the builder does not meet the lender's panel requirements, your application may be declined even if your income and deposit are sufficient.

Some lenders will not approve a construction loan if the builder is not on their approved list, or if the contract is cost-plus rather than fixed price. A cost-plus contract allows the builder to pass on cost increases during construction, which introduces uncertainty for the lender and often results in a declined application. Buyers who have already signed a land contract and paid a deposit may find they cannot proceed with the build because the builder is not acceptable to their lender.

Work with your broker to confirm that the builder and the contract structure meet lender requirements before you sign anything. If you are choosing between two builders, ask your broker which one will give you access to a wider panel of lenders and more competitive rates. This step alone can prevent situations where you are forced to use a single high-cost lender or abandon the project altogether.

Buying a house and land package in Queensland offers access to the First Home Owner Grant, stamp duty concessions, and the opportunity to build a new home tailored to your needs. The process involves more complexity than purchasing an established property, and the financial structure must account for two settlements, construction timing, and lender requirements that vary significantly across institutions. Call one of our team or book an appointment at a time that works for you.

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