What is the difference between a land loan and a home loan?
A home loan funds a finished dwelling — something a lender can value, take security over, and sell if it has to. A land loan funds vacant land before anything is built on it. That difference in security is the reason the two products behave differently, and it shapes the deposit, the rate and the structure you will be offered. The question is rarely "can I borrow against land"; it is which lender's policy fits the path you are actually on — buying land to hold, building on land you already own, or taking a house and land package — and how the borrowing should be structured around it.
Buying land before you build
When you purchase land ahead of a build, you will generally pay a deposit of around 10% of the purchase price, with the balance payable on settlement. There can be a stamp duty advantage here too — in many states duty is assessed on the land value only when you buy the block, rather than on the combined cost of land plus the completed house. The rules and rates vary by state and by your circumstances, so it is worth confirming the duty position with your conveyancer or accountant before you rely on it.
Vacant land is harder security than a built home, so lenders read it more conservatively. Loan-to-value ratios tend to be tighter, some lenders limit the size, zoning or location of land they will fund, and a few expect you to build within a set period. Policies differ widely from one lender to the next, so a block that sits outside one lender's appetite may fall comfortably inside another's.
Building on land you already own
When you build on land you already hold, the funding usually comes in two parts — one facility against the land and a construction loan for the build itself. The construction loan is drawn in stages rather than in a single lump: the lender releases progress payments at set points as the build moves through slab, frame, lock-up, fit-out and completion. You pay interest only on the funds drawn so far, so repayments step up as the build advances rather than starting at the full loan amount.
This is the part worth structuring well. Progress draws, the order of settlement and the way the land and construction facilities sit together all affect cost and cash flow during the build, and they are easier to get right at the start than to unwind later.
House and land packages
With a house and land package the arrangement is often simpler. In many cases you buy the home already completed on the developer's land, which means a deposit of around 5% and the balance payable once the home is finished — no staged progress payments, because there is no build for you to fund along the way. It reads much more like a standard home loan than a construction loan.
The builder matters here as much as the finance. A reputable builder offering a fixed-price contract protects you from cost blowouts mid-build, and you will want one who holds the appropriate insurances and has a sound record of meeting their build timeline. The strength of the contract and the builder feeds directly into how lenders view the deal.
If you are weighing land, a build, or a completed package, it is worth mapping which lenders fit the path you are on and how to structure the land and construction borrowing so the cost and timing work in your favour. Book a strategy session and we will work through where you genuinely stand.
General information only — not personal financial product or credit advice. Lending is subject to each lender's policy, your full circumstances and responsible-lending assessment. AeFin is an Australian Credit Representative (CR 464548) of Finsure (ACL 384704).