Building your own home is an ideal that many of us share. Finding that perfect block of land to build your dream house on and settle down in is an incredibly exciting experience. Keep reading to see how you can make this dream a reality by borrowing against bare land.
For the most part, the process isn’t that different than buying a standard home. You have to meet affordability criteria and the bank has to be happy with the property as security.
The distinction lies in the type of land you are looking to purchase and what you are planning to do with it. These are both factors that can affect the LVR (Loan to Value Ratio) the bank will offer you.
In general, there are two types of Vacant land; Serviced and non-serviced. Serviced, is the name given to land that already has utilities available to it such as power lines, sewage, water pipes etc… You will often find this kind of land in subdivisions or new developments. For this class of vacant land, some banks will lend up to 80% of the purchase price if its owner occupied. If the land is not serviced, the LVR generally drops down to around 50% for most banks, meaning you need to come up with the other 50% as deposit.
In some cases with certain banks, to get above 50% LVR we may also need to demonstrate your intent to build on the property within the next 12 months. This is not necessarily a signed build contract but can be an indicative quote from a reputable build company will be adequate.
There can also be other requirements like the need for providing a valuation. Land on its own is generally considered riskier for a bank than a standard property with a house already on it – so it can come with a few extra hoops to jump through. But it can very do-able!
If you’re looking to buy some land with a view of one day building on it, we’re here to guide you through the process.