Land Loans – Finance For Vacant Property

Land loans could be the finance you need to purchase a vacant block of land. However, these loans are a particular type of finance that may not work like a traditional home loan. Monzi is here to explore everything in our simple guide.

Please note, certain ideas and products presented in this article may not be offered by Monzi nor the lenders we work with. This article presents only general information. Consider seeking professional financial, taxation, legal or other advice to check how the information and ideas presented on this website relate to your unique circumstances.

What are land loans?

Land loans are a type of mortgage that is used to purchase a vacant block of land. Moreover, these loans may be ideal if you find a block of land, but don’t have any plans to build just yet.

Vacant land loans, however, may be more difficult to secure than a typical house and land package. Moreover, these loans have different conditions and cost structures to a normal mortgage.

If you’re confused as to what all this means, don’t stress. Monzi is here to get to the bottom of it all.

How do land loans work?

A land loan lets you purchase a vacant block of residential land. Moreover, the land you purchase must not be income earning.

Ultimately, however, each lender may vary in how their loans for vacant land work. For example, certain lenders may impose different loan conditions, depending on the size of the block you’re purchasing.

In general, loans for land purchases have higher deposit requirements and fees in order to compensate for the added risk. Depending on the lender, you may be offered either a fixed interest rate or a variable rate.

Finally, remember that these loans are often a substitute for a normal home loan. Specifically, certain lenders may not be able to offer you a home loan if there is no ‘home’ on the property as such.

Where can I get a land loan?

You may be able to secure a land loan from a bank or an alternative lender. Depending on the lender, you may be able to choose a fixed or variable rate loan.

Keep in mind however, a loan for land purchase is not structured the same as a typical mortgage. Specifically, these loans may require a bigger deposit (higher % of principal) and may come with more expensive rates. This is because lenders see these loans as riskier than a normal home loan.

Therefore, get in contact with the lender beforehand to discuss specific requirements.

Which bank is best for land loans?

Unfortunately, we cannot say which bank is best for financing vacant blacks of land. After all, each consumer has different needs and objectives. Moreover, each lender varies in what they offer and how their loans work.

Despite this, as a general rule, a loan may be appropriate for you if:

  • it meets your needs and objectives; and
  • you’re reasonable able to afford your repayments.

Therefore, do your research before applying with a lender.

How can I compare loans for land only?

Consider the following when searching online for loans for buying land only:

  • Interest. Obviously, the interest rate plays a major role in influencing the total cost of your loan. Consumers should also factor in the advertised comparison rate, as it also factors in most of the fees and charges.
  • Fees & charges. Make sure you are aware of all the payable fees and charges associated with your loan.
  • Loan to value ratio (LVR). A vacant block of land is more difficult for the lender to sell in the event of a repossession. As a result, many lenders may offer quite a low minimum LVR. This may mean you will need to save up a bigger deposit than you expected.
  • Repayments. Are you offered flexibility when it comes to repayments? Are you able to make extra payments for free?
  • Extra features. Certain lenders may offer additional features like redraw options or offset accounts.

Consider your options before making a decision. If you aren’t sure where to begin, consider seeking financial advice.

How much can I borrow for a block of land?

Again, there are too many variables for Monzi to provide a definitive answer. As a general rule, however, the bigger the property, the lower the LVR will be able to borrow.

In other words, you may need to save up a bigger deposit for larger properties.

Ultimately, lenders assess applications on a case-by-case basis. Get in contact with a lender directly for more information.

Before applying for land loans

Before you apply for finance for a rural property, consider the following:

  • Risk. Banks and other lenders see loans for vacant property to be risky. This is because selling vacant land is, in general, more difficult that land with property on it. Moreover, land prices fluctuate more readily than house and land properties, especially in regional Australia.
  • Size. If you opt for a bigger piece of land, you may need to come up with more of your own money. This is because, in general, lenders offer a lower LVR for larger properties.
  • Location. Things like the location, zoning and accessibility of your desired property will affect how lenders assess your application. Remember, these loans are only on offer for residential properties – not income earning.

What are the pros and cons of land loans?

There are a number of costs and benefits worth considering before you apply for loans for land only.

Pros

  • You can purchase just a vacant block of land with these particular loans.
  • There are no requirements to build within a certain timeframe.
  • Refinance an existing vacant land home loan.

Cons

  • Lower LVR means you will need to save up more of your own money. In other words, the required deposits for these loans are larger than typical home loans.

Are land loans the same as construction loans?

Land only loans are not the same as construction loans. Specifically, the main difference between the two is lenders offering construction loans often set a time limit by which a house must be built. In general, construction loans provide a deadline of two to three years from the date of purchase.

A loan for a vacant block of land does not have any of these time constraints. Therefore, you’re free to build at your own pace.

What is a house a land package loan?

Many of the new builds in Australia are done by property developers. Moreover, these developers acquire land and turn it into a residential area. Developers then either build and sell homes, or offer a number of designs that you can choose from.

While it may be possible to take out two loans, one for the purchase of the land and the other for the build, most Australians finance through the one lender. This type of finance is known as as house and land package home loans.

In general, a straightforward mortgage covers the purchase of the land. Then, consumers use the progressive “draw down” function of a construction loan. In other words, money is released at certain points of the build.

Is it hard to get a loan for land?

As we have mentioned earlier, lenders are often more conservative with these loans when compared to traditional home loans. As such, the assessment process for these loans may be more involved than a traditional loan.

More specifically, lenders will often take into account the:

  • size of the property
  • its location
  • its accessibility
  • the zoning of the land
  • what you intend to build on it.

Land loans sunrise over brown fields

Are there any bad credit loans for purchasing land?

You may be able to get finance for a land purchase if you have poor credit. However, as we have established earlier, lenders are cautious when offering these loans.

As a result, it may be very difficult to secure a loan with poor credit. Moreover, if it is possible, the LVR will be very limited.

If you have any of the following on your credit report, you may need to consider loans for bad credit:

  • defaults
  • missed or late payments
  • court orders
  • debt agreements
  • etc.

Can Monzi offer me land loans?

No, Monzi cannot offer you these loans. This is because we are a lender-finder service that aims to match consumers with a potential lender.

Specifically, over time we’ve built up a network of trusted credit providers that may be able to offer personal loans. The table below displays the personal loans potentially on offer.

LoanAmountTerm
Small personal loan$300 to $2,00012 months
Medium personal loan$2,001 to $4,60013 to 24 months
Large personal loan$5,000 to $10,00013 to 24 months

Bear in mind, consumers will need to secure any loan over $2,000 with an asset. This is known as a secured loan. Moreover, the lenders on Monzi’s panel are potentially able to accept the following assets as collateral:

  • car
  • caravan
  • motorbike
  • boat.

How do I apply with Monzi?

While you cannot apply for land loans, applying for personal loans is easy. In fact, you can do it all in three simple steps. Before you get started, however, make sure you meet our eligibility criteria:

  • at least 18 years old
  • hold an Australian Citizenship or Permanent Residency
  • have a bank account with online banking
  • have a personal contact number and email address.

You’re ready to apply once you meet everything above. Here’s how it all goes down:

Step one

Use the loan slider to select the amount you wish to apply for. In addition, select your ideal repayment terms.

The loan sliders shows examples of what your weekly, fortnightly or monthly repayments may look like. Be aware, these examples are just that – rough examples. In short, the actual cost of your loan may vary depending on the lender.

Consumers click apply now once they’re happy with their selection.

Step two

The loan slider takes you to the submission form. In short, provide all the information we ask for. Don’t stress too much though – we only ask for essential information. In addition, our system is able to digitally access a lot of what we need.

We also ask you to provide your online banking details. This is so our system can pull PDF copies of your bank statements. We can then pass this on to a potential lender, so they can quickly get an understanding of your current:

  • income
  • expenses
  • spending habits
  • repayment history with other lenders
  • etc.

Step three

Finally, you’re free to kick back once you submit your application. From here, we’ll do our best to match you with a potential lender.

If you apply during normal business hours, we may have an outcome for you within 60 minutes. Apply outside of these hours and you may only receive an outcome the following business day. Moreover, you may only receive an outcome the following business day if you apply over the weekend or on a public holiday.

Finally, if we successfully match you with a lender, they’ll be in touch to complete the assessment.

How do I make repayments?

Repayments are easy and generally made through a direct debit. In other words, your repayments are automatically deducted each repayment cycle. Moreover, the direct debit stops once you settle your loan.

If you cannot afford an upcoming repayment, get in contact with your lender. They may be able to cancel or reschedule your repayment for a contractual fee if you give them enough notice.

On the other hand, if your life changes dramatically, you may not be able to afford your regular repayments. For example, your ability to make repayments is drastically reduced if you lose your job or are injured and can no longer work.

You may be eligible for financial hardship if you find yourself in this position.

To apply for hardship, get in contact with your lender. Moreover, you will need to provide evidence of hardship (bank statements, separation certificate etc.). Lenders may offer a repayment plan if they approve you.

Monzi Personal Loans

While we may not be able to help with land loans, we’ll do our best to match you with a lender offering personal loans.

With Monzi, it’s one application and one outcome. Apply during normal business hours and we may have a result for you within 60 minutes. Moreover, with our 100% online platform, you can apply from anywhere at any time, completely paperwork free!

Factor In

Costs

Two credit cards
Two credit cards

You won't use a penny to apply for our lender-finding service, but here's some costs you could expect from a lender

Loan amount

$300 - $2,000

Terms

12 months

Costs

20% upfront establishment fee

+ 4% monthly fee

Example

Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.

Under the current legislation, most small personal loan providers don’t charge an annual interest rate (you’ll know this as an APR) %. The maximum you will be charged is a flat 20% Establishment Fee and a flat 4% Monthly Fee. The maximum comparison rate on loans between $300 and $2000 is 199.43%. This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate

Loan amount

$2,001 - $4,600

Terms

13 months

24 months

Costs

48% annual percantage rate

67.41% comparison rate p.a.

Example

Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $1,379.06 (reducing interest) = $4,779.06 total repayable over 18 months with weekly installments of $61.27.

The Interest Rate for Secured Medium Loans is 48%. The Typical Comparison Rate is 67.41% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.

Loan amount

$5,000 - $10,000

Terms

13 months

24 months

Costs

21.24% annual percantage rate

48% comparison rate p.a.

Example

Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5,577.12 (Interest) = $15,577.12 total repayable over 24 months with weekly installments of $149.78.

The Interest Rate for Secured Large Amount Loans is 48%. Maximum Comparison Rate is 48% p.a. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate with the lender that finances your loan. Click here to see a worked example.