In short: A vacant land loan funds a block you intend to build on later. Lenders generally require a larger deposit than for an established home, often 20% for untitled land, apply a shorter maximum term, and want to see a plausible plan to build. Land alone earns nothing and costs money to hold, so the deposit, the holding costs and the sunset date all need modelling before you sign.
Melbourne's growth corridors, and the equivalents in Sydney's north-west, Brisbane's south and Perth's north, run on land sales. Buying the block first and building later gives you control over the builder and the timing. It also puts you on the hook for two to three years of holding costs and a settlement date you do not control.
Titled versus untitled land
This is the fork in the road that determines almost everything else.
| Titled land | Untitled land (sold off the plan) | |
|---|---|---|
| What you are buying | A registered lot with a title you can settle on now | A right to a lot that does not legally exist yet |
| Settlement timing | Usually 30–60 days | When the plan of subdivision registers, often 6–30 months later |
| Typical deposit to the developer | 10% | 5–10%, sometimes as little as $5,000–$10,000 |
| Typical lender deposit at settlement | 5–10% possible with some lenders | Commonly 20%, because valuation risk is higher |
| Formal approval available | Yes, in the normal way | No. Approvals expire in 3–6 months, so you re-apply near registration |
| Main risk | Ordinary | Registration delay, a valuation below the contract price, your circumstances changing before settlement |
The single largest practical risk with untitled land is that your pre-approval expires long before the title registers. Lenders will not hold an approval open for 18 months. That means you are assessed again, on the income, the debts, the rates and the policies that exist at the time of registration, not the ones that existed when you signed.
We have seen this cost people their block: a job change, a new car loan, a new child, or simply a policy tightening between contract and registration. If you are buying untitled, the discipline for the whole waiting period is to add no new debt, keep your job stable, and keep saving.
The sunset clause
Contracts for untitled land contain a sunset date. If the plan has not registered by that date, one or both parties can rescind. Victorian law restricts a vendor's ability to use a sunset clause to end a residential off-the-plan contract without the purchaser's consent or a Supreme Court order, which is a meaningful protection, but the mechanics vary by state and by contract. Read the sunset provisions carefully and have your conveyancer explain them before you sign. See buying off the plan and contract of sale.
Worked example: a $420,000 block in Melbourne's north
Anita signs for an untitled 400 square metre lot at $420,000, registering in about 14 months.
At contract
- Deposit to the developer: 10% = $42,000, held in trust.
At settlement, 14 months later
| Item | Amount |
|---|---|
| Purchase price | $420,000 |
| Lender deposit required at 80% LVR | $84,000 (the $42,000 already paid plus $42,000 more) |
| Loan | $336,000 |
| Victorian land transfer duty on $420,000 | $2,870 + 6% of $290,000 = $20,270 |
| Conveyancing and searches | roughly $2,000 |
| Cash needed at settlement, beyond the deposit already paid | roughly $64,300 |
First home buyers should check the duty position for vacant land in their state before assuming this figure. Victoria's first home buyer duty concession applies to the dutiable value of the property, and a vacant-land purchase followed by a build is assessed differently from a completed house. Confirm at sro.vic.gov.au. In New South Wales vacant land is exempt to $350,000 with a concession to $450,000 for eligible first home buyers, and Queensland abolished duty for first home buyers on vacant land to build on from 1 May 2025.
While she holds the land, before building
- Interest on $336,000 at an illustrative 6.50% p.a. (land loans usually price above a standard home loan): about $1,820 a month on a principal and interest basis, or about $1,820 of interest a month if interest only.
- Council rates on the vacant lot: roughly $1,500 a year.
- Land tax: the principal place of residence exemption does not apply to land you do not live on, so if your total Victorian landholdings exceed the threshold, land tax applies. See land tax Victoria explained.
- Vacant residential land tax now applies state-wide in Victoria to residential land left undeveloped in some circumstances. Check whether your block is caught, because the cost is material.
Holding a block for 18 months before construction starts can easily cost $30,000 to $40,000 in interest and rates that buys you nothing. That is not an argument against it, but it is a number that belongs in the decision.
Deposit and LVR expectations
- Titled land, building within 12 months: some lenders will go to 90% or even 95% LVR with LMI, particularly where a build contract is signed.
- Titled land, no build plans: commonly capped at 80%, sometimes 70%, and a shorter loan term.
- Untitled land: commonly 80%, occasionally 90% with a signed build contract.
- Large blocks: once the land exceeds a lender's size limit, often around two hectares, the loan is treated as rural or lifestyle rather than residential, with different terms. See rural and lifestyle loans.
- Location: lenders apply postcode categories to land in particular, because a half-built estate in a slow-selling corridor is a hard security to value. See postcode and location lender policy.
Lenders will also ask what you intend to build and when. Many apply a condition requiring construction to start within a set period, commonly 12 to 24 months. Read the condition, because breaching it can trigger a review of the facility.
Converting to a construction loan
When you are ready to build, the usual path is to refinance the land loan into a land and construction facility with the same or a different lender. The lender values the land plus the fixed-price build contract as an "on completion" valuation, lends against that, pays out the land loan and then releases progress payments to the builder in stages.
During construction you pay interest only on the amount drawn so far, which starts small and rises with each stage. Our construction loan interest calculator models that curve, and construction loan progress payments explains the stages and what to check in a builder's contract.
Two things to get right before you buy the land: whether your builder's contract will be acceptable to lenders (a fixed-price HIA or Master Builders contract is the easy path, an owner-builder or a cost-plus contract is much harder), and whether the total of land plus build will value up. See house and land packages.
Frequently asked questions
Can I get a land loan with a 5% deposit?
Occasionally, on titled land with a signed fixed-price build contract, through the small group of lenders that treat land-and-construction as a single house purchase. On land alone with no build plans, 5% is very unlikely. First home buyers building a new home may also be eligible for the Australian Government 5% Deposit Scheme, which does cover land-and-build within the price cap. See the 5% deposit scheme guide.
How long can a vacant land loan run?
Many lenders cap land-only loans at 10 to 15 years rather than 30, and some require interest-only for a limited period followed by principal and interest. That shortens the term and raises the repayment. If you intend to build, the facility is usually refinanced into a 30-year loan on completion, so the shorter term is temporary.
What happens if the land does not register before my finance approval expires?
You reapply. The lender assesses you again on your circumstances at that time. This is normal and expected on untitled land, and it is why we tell clients not to take on new debt during the wait. Your contract obligation to settle does not depend on your finance approval surviving, so a change in your circumstances can leave you contractually bound without funding.
Do I pay stamp duty on land, and again on the house?
You pay transfer duty on the land purchase. You do not pay transfer duty again on the building contract, because you are not transferring the house from anyone. That is the main reason a land-and-build is usually cheaper in duty than buying a completed house of the same total value, and it is worth modelling with our stamp duty calculator.
Can I buy land with a friend or a sibling?
Yes, and it is common. Get the ownership structure right at the start, because changing it later can trigger duty. Joint tenants and tenants in common produce very different outcomes on death and on sale, and every borrower is jointly and severally liable for the whole loan. Read joint tenants versus tenants in common and buying property with a partner.
Is a land loan a good idea if I am not sure when I will build?
Usually not. Land you are not building on is a negatively yielding asset: it produces no rent, attracts interest, rates and possibly land tax, and gives you no tax deduction unless it is genuinely held to produce income. If the plan is vague, an established home or a titled block with a firm build date is generally the better use of the same money.
Talk to GNT Finance
We work with buyers in Melbourne's northern and western growth corridors every week, and we know how the registration and valuation timing plays out. Before you sign for a block, let us model the settlement cash, the holding cost and the conversion to a construction loan. Consultations in English, Nepali or Hindi, with an interpreter in your language on request. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Duty rules and land tax settings differ by state and change — confirm current requirements with the relevant state revenue office.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.