Land & Build Loans Made Simple—How to Finance Your Dream Home from Scratch

When it comes to building a brand-new home from the ground up, the financing path is often more complex than simply buying an existing property. As a specialised mortgage broker, OM Financials helps clients understand how land-and-build (also known as “https://askfinancials.com.au/home-loan/buying-home”) loans work, so new-build buyers can start their journey with clarity and confidence.

What is a Land & Build Loan?

A land & build loan combines two stages into one financing package: purchasing the land and building the home. Rather than first taking a loan to buy the block and then a separate construction loan, you apply once, and the loan is structured to cover:

The land purchase phase: acquiring the block of land.
The construction phase is full of progressive drawdowns while your builder constructs the home in stages.
This structure suits clients who want to build from scratch. This way, you can quite easily avoid the load of two loans at the same time. And there will be no extra paperwork required.

Why Use Broker Expertise (and Work With the Right Property Team)?

It is critical to have professional financial advice when starting with a clean slate. OM Financials keeps clients informed and assisted through every step of the land & build process with specialised and tailored loan advice, and access to multiple lenders, making certain your finances are bulletproof from day one.

Key Steps to Financing Your New Home Build

Here is a strategic roadmap to guide new-build clients:

Step 1: Pre-approval or initial assessment
Engage OM Financials early. They’ll assess your income, expenses, credit history and borrowing capacity. You’ll gain a clear idea of how much you can borrow and what you’ll need for deposit, construction buffer and land-purchase costs.

Step 2: Choose the land, submit the contract & secure the block
Once you’ve found suitable land (with the help of your mortgage agent), you exchange contracts on the land purchase. A deposit is paid, and you then include this land under the land & build loan.

Step 3: Building contract & loan documentation
You’ll enter into a building contract with a licensed builder. The lender will require the contract, plans, quote, builder’s credentials, council approvals and site works details. Loan documentation is prepared so that once the land is acquired, the construction drawdowns can begin.

Step 4: Land settlement & construction drawdowns
The land settles and is incorporated into the loan. Then the builder commences work. Typically, the lender releases funds in stages – e.g., slab, frame, lock-up, fix, and completion. Each stage triggers an inspection and release. While you’re building, you may pay interest only (on drawn funds) until completion.

Step 5: Completion and transition to a standard home loan
In some cases, when the home is built, there may be a final inspection, and the loan moves to a regular home loan (principal + interest) that is based on the full amount. At this point, you repay according to ordinary repayment terms.

4. What to Watch & Ask About

When dealing with land & build loans, these are some of the essential questions to ask your broker agent:

What exactly are the drawdown stages? How many are there and when are funds released?
What is the interest rate during construction vs once completed? Is it interest only or principal and interest from day one? During the construction period, most loans are interest-only; that means you only need to pay interest on the amount that has been drawn (used) so far.
What are the deposit/ equity requirements? Often, lenders want a certain deposit for the land and possibly a buffer for building costs.
Are site works or tricky land costs included in the budget? Extra costs for a sloping block or hard-to-build site can increase your loan amount and total build cost.
What is the loan-to-value ratio (LVR) for the land & build package? Is there Lenders’ Mortgage Insurance (LMI) if you borrow over 80%?
Does the builder contract meet the lender’s requirements (licence, insurance, fixed price or allowances for variations)?
After completion, what happens with repayments — will your payments increase significantly? Make sure you can service the full loan.

Common Mistakes New-Build Clients Make (and How to Avoid Them)

Under-estimating build-cost variations: Builders might need to change materials or fix site problems. It’s wise to include a contingency and make sure the lender is aware of possible variations.
Confirming without site work: Expectations may shift if you have a steep block, an unfamiliar zone, and/or added retaining walls. Working with a mortgage broker like OM Financials ensures you understand how these site factors can affect your loan approval, valuation, and overall budget early in the process.
Starting construction without pre-approval of a loan: Some clients underestimate the complexity of a construction loan, and lenders may take longer to assess plans. Get your loan sorted early.
Ignoring timelines: You cannot ignore the deadline because delays can literally cause increasing interest and additional costs.

Why the Right Team Matters

By working with a specialised mortgage broker like OM Financials, you bring expert financial guidance to your property journey. A broker helps you treat the build process strategically, from structuring the right loan to managing progress payments and ensuring your finances align with your long-term goals. For new-build clients, this means fewer surprises, smoother drawdowns, and a stronger chance of finishing on budget and on time.

Ready to build your dream home?

When you’re planning to start from scratch — buying land and building your new home — the team at OM Financials is ready to help. Whether you’re just beginning or are already mid-process, their experienced brokers will guide you through the financing landscape and compare options across 50+ lenders.
What are you waiting for now? We at OM Financials are available to serve in the best way possible. Feel free to call us on 0478 876 967 or book a free consultation online. We always say that your investing journey can be simple with the right guidance.