Fran Jerome is a CPA-qualified mortgage broker and strategist at Oliey Finance, helping first home buyers in Pakenham, Officer, Clyde North, Cranbourne and surrounding SE Melbourne suburbs navigate land and build finance from contract to construction completion.
Buying land and building a home is one of the most common paths to home ownership in Melbourne’s southeast growth corridor, and one of the most misunderstood from a finance perspective. It is not the same as buying an established home. It involves two separate contracts, two separate loan approvals, and a construction loan that works very differently to a standard mortgage.
Getting the finance structure wrong before you sign anything can cost you the purchase, delay your settlement, or leave you with a loan that doesn’t suit the life you’re building into.
What Makes Land and Build Finance Different
When you buy an established home, you have one contract and one loan. When you buy land and build, you have:
- A land contract — you buy the block first, often before the house design is finalised
- A construction contract — a separate agreement with your builder for the build itself
- A construction loan — which draws down in stages as the build progresses, not all at once
You only pay interest on what has been drawn down at each stage. This is actually an advantage during construction, your repayments start low and increase as the building progresses. But it means your finance needs to be approved in a specific sequence, and the timing matters.
The Stages of a Construction Loan
Construction loans typically draw down across these stages:
- Slab down
- Frame up
- Lock up (roof, windows, doors)
- Fixing (internal fit-out)
- Completion (final inspection and handover)
At each stage, your builder invoices the lender directly, the lender sends a valuer to confirm progress, and the next draw is released. Understanding this process before you sign your building contract means no surprises mid-build.
First Home Owner Grant — What You Need to Know
In Victoria, first home buyers building a new home may be eligible for the First Home Owner Grant (FHOG). As of the current grant conditions:
- The grant applies to the construction contract, not the land purchase
- You must move into the property as your principal place of residence within 12 months of construction completing
- The property must be a new home, not a renovated existing dwelling
- Income and property value caps apply
The FHOG application is typically lodged through your lender as part of the finance process. Fran can confirm your eligibility and make sure the application is handled correctly alongside your construction loan approval.
Stamp Duty Concessions for First Home Buyers in Victoria
First home buyers in Victoria may also be eligible for a stamp duty exemption or concession on their land purchase, depending on the value of the land. This can save thousands of dollars at settlement.
Eligibility and thresholds change periodically; Fran can confirm what applies to your specific purchase at the time you’re buying.
Who This Page Is For
- First home buyers looking at house and land packages in Pakenham, Officer, Clyde North, Cranbourne, Berwick and surrounding growth suburbs
- Buyers who have found land and are now sourcing a builder
- Buyers who have signed a building contract and need finance sorted urgently
- First home buyers unsure whether they qualify for the FHOG or stamp duty concessions
- Anyone who has been told by a bank they don’t qualify and wants a second opinion
Frequently Asked Questions
Q: How does a land and build loan work in Australia?
A: Generally you need one application, as most lenders prefer to see both the land and build contracts together. The land loan settles first, like a standard home loan. The construction loan then draws down in stages as the build progresses, with interest charged only on what has been released at each point. Once construction is complete, the loan typically converts to a standard principal and interest mortgage. Some lenders simultaneously charge principal and interest on the land component and interest only on the construction component. This varies by lender and borrower circumstance, which is why choosing the right lender from the start is crucial.
Q: Do I need to have a builder before I can get finance approved?
A: For the land purchase, you can often get the land loan approved before you have a signed building contract. But it’s highly advisable to ensure that a building contract is in place, as you can borrow more and you do have wider lender options with a building contract. Additionally, the construction loan approval requires a fixed-price building contract, council-approved plans, and a builder with the appropriate licence and insurance. Fran can advise on the right timing for each step based on your individual circumstances.
Q: Can first home buyers use the First Home Owner Grant on a land and build package in Victoria?
A: Yes. In Victoria, first home buyers building a new home may be eligible for the FHOG. The grant applies to the construction contract value, not the land. You must intend to live in the property as your principal place of residence. A broker can help confirm eligibility before you sign anything and lodge the application through the lender at the right time.
Q: What deposit do I need for a land and build in Pakenham, Officer or Clyde North?
A: Most lenders require a minimum 2% to 10% (depending on the purpose of the property) deposit across the combined land and build value. A minority of lenders can work with a 2% deposit if you meet Lenders Mortgage Insurance requirements or qualify for a government guarantee scheme. The exact amount depends on your lender, income, and the valuations on both contracts. Speak with Fran before assuming a number; the answer is often better than people expect.
Q: Can I use the First Home Guarantee (government scheme) for a land and build?
A: Yes, the First Home Guarantee (formerly the First Home Loan Deposit Scheme) can apply to land and build purchases, subject to property value caps and availability of places in the scheme each financial year. This scheme allows eligible first home buyers to purchase with as little as a 5% deposit without paying LMI. Places are limited and timing matters.
Q: What happens if my build takes longer than expected — does that affect my loan?
A: Construction loan approvals have validity periods, typically 12 months. If your build runs over that period, an extension may be required. Choosing a builder with a realistic timeline and a fixed-price contract protects you from cost blowouts that could affect your loan. Fran can walk you through what to look for in a building contract before you sign.
Q: I’ve already signed a land contract. Is it too late to sort my finance?
A: Not necessarily, but time is now critical. Land contracts have settlement deadlines, and if finance is not arranged in time you risk losing your deposit. Contact Fran immediately with your contract details so the timeline can be assessed and finance moved as quickly as possible.
Q: Who should I speak to before signing a land and build contract in SE Melbourne?
A: Speak to a mortgage broker before signing anything. The finance approval process for land and build is more complex than a standard home loan, and the wrong structure or signing before finance is confirmed can cost you the purchase or result in delays at settlement. A 30-minute call with Fran before you sign could save you thousands and a significant amount of stress.
Q: What suburbs in SE Melbourne does Oliey Finance help first home buyers in?
A: Pakenham, Officer, Clyde, Clyde North, Cranbourne, Cranbourne North, Cranbourne East, Berwick, Narre Warren, Botanic Ridge, Frankston and surrounding growth corridor suburbs.
Book a Free 30-Minute Strategy Call with Fran
Ideally before you sign anything, but at any stage of the process.
Or call directly: 0409 961 703 Email: fran@olieyfinance.com.au
Fran Jerome | Credit Representative 442427 | Authorised under Finsure Finance & Insurance Pty Ltd | ACL 384704 | MFAA Member
General advice only. Grant and concession eligibility is subject to individual circumstances and current government policy. Credit eligibility is subject to lender assessment. Always seek independent legal and financial advice before signing property contracts.