Land then construction loan VS LAND/CONSTRUCTION Loan

Hi,

What are the benefits (or on the other side of the coin, disadvantages) in:

Acquiring a loan just for the land purchase, and then one for the construction phase

VS

Waiting a little more some more money and going for a larger loan to cover land & construction together

?

Not having to pay transfer stamp duty on the land as the first home owners grant would wave it?

Biggest advantage of doing both in one hit is when you're approved for a loan you know where you stand, whereas when you are approved for land only, you still have the issue and worry about what will happen with the construction loan.

Then if you also have a low deposit and need to capatalise LMI if purchasing land only, you might find that you will need to source extra funds when applying for the construction as the LMI incurred is added to the base amount.

FHOG is paid on the first draw down of the construction phase (after slab), so you would normally still need to pay the stamp duty at land settlement with your own funds.

Cheers,

Tom

It really depends on your situation as to which is the best choice.

If you do not have plans / council approval / building contract etc then you pretty much have no choice but to buy the land only and just get a land loan. You can get a pre-approval for the construction loan to give you some security, however it is by no means infallible.

If you have a building contract, council approval etc all ready to go then you can get land and construction approval at the same time. I would normally recommend setting it up as two separate loan accounts if you are buying the property, to avoid delays with land settlement and would set it up as one loan if you already own the land.

Basically it is complicated but a good bank manager or broker should sort this out for you.