How to use this guide
Buying land in Australia is exciting, but it’s not as simple as choosing a block and signing a contract. There are rules, costs, and finance options that can catch first-time buyers off guard. This guide explains everything you need to know, from lender requirements to settlement and building later. Planning ahead can save time and money and help you avoid costly mistakes.
What is a land loan?
A land loan is a type of mortgage designed for buying vacant land. Unlike a standard home loan, it only covers the land purchase, not construction. Many lenders expect you to move to a construction loan later, especially if you plan to build within a set timeframe. Land loans often have stricter conditions and higher interest rates because vacant land is considered riskier. Understanding these differences early will help you choose the right product.
Benefits and risks of land loans
Benefits
Risks
What lenders look for
Lenders assess several factors before approving a land loan. Meeting these criteria improves your chances of approval and may help you secure better rates.
Zoning and access
Land must be residential and accessible by road. Blocks without these features may be declined or attract stricter conditions.
Credit score and income stability
A strong credit score and steady income show lenders you can manage repayments. They may also review your existing debts and spending habits.
Valuation and market demand
An independent valuation is usually required. Lenders want assurance that the land’s market value supports the loan amount.
Financial preparation
Get pre-approval for a land loan
Securing a pre-approval early gives you a clear idea of your borrowing power and helps you act quickly when you find the right block. It also signals to sellers that you’re a serious buyer, which can strengthen your position during negotiations.
Calculate all upfront costs
The purchase price is only a part of the picture. Use the stamp duty calculator to estimate tax costs. Add site preparation, utility connections and legal and council fees. They often add thousands to your budget. Learn about upfront costs.
Plan ahead for building costs
If you plan to build later, factor in construction costs and check you’ll need a separate building loan. Planning for these costs now will prevent delays and financial stress down the track. A well-planned financial strategy is the foundation for a successful land purchase.
The purchase process
Once your finances are sorted, start with due diligence. Check zoning, soil quality, and any restrictions before making an offer. When you receive the contract, review it carefully for clauses about building timeframes or developer conditions. A conveyancer can help you understand the details. After signing, pay the deposit.
Land settlement
Settlement is when ownership officially transfers to you. Before the date arrives, confirm that all contract conditions have been met and arrange the balance of funds with your lender. Your conveyancer will coordinate final checks and prepare the settlement statement. On settlement day, the title is lodged and ownership is recorded.
Land loan vs. construction loan
| Land loan | Construction loan | |
|---|---|---|
| Purpose | Buy vacant land | Fund building costs |
| Interest rate | Higher than home loans | Often variable, paid on drawn funds |
| Deposit | 20 to 30% | Can be lower if combined with land |
| Conditions | May require building within two to five years | Progress payments during build |
If you plan to build soon, a combined land and construction loan may offer convenience and cost savings.
Considerations for building later
If you plan to build later, check your contract for any restrictions. Some developers and councils impose timeframes for construction. Holding land without building can mean extra costs like council rates and higher interest. You should also factor in land tax if the property is not your principal place of residence (PPOR). This tax applies to land held for future development and properties subsequently built for investment purposes and can significantly increase holding costs. Confirm whether your lender allows extended timeframes and if you need a construction loan later.
Speak to a home loan expert
Book an appointment to speak with one of our experts via phone, video or face-to-face.
Explore other home and property guides
Building your investment property
Learn about the pros and cons as well as the financing basics of building an investment property.
How to get a home loan
See a full list of the information we'll request here.
First home buyer’s guide
Our easy step-by-step guide to buying your first home.
Related products and services
Home loans
Home loans for every need with tools, calculators and guides to help you choose.
How much can I borrow?
Get an estimate of how much you can afford to borrow for your home.
Home loan repayment calculator
Compare your loan amount with other factors to estimate your minimum loan repayments.
Contact us for home loan related queries
This is how you can get in touch.
Start a conversation with a banker
- Log into either NAB Internet Banking or the NAB app.
- Tap on the message icon.
- Type ‘speak to a person’ in the conversation window.
Call us
Speak to a home loan expert about a new or existing home loan.
Monday to Friday, 8:00am to 7:00pm (AEST/AEDT)
Saturday to Sunday, 9:00am to 6:00pm (AEST/AEDT)
Book an appointment
Make an appointment to see us at your nearest branch, ask a mobile banker to come to you or ask us to call you back.
Terms and Conditions
Apologies but the Important Information section you are trying to view is not displaying properly at the moment. Please refresh the page or try again later.
The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.
Target Market Determinations for these products are available at nab.com.au/TMD.