House and Land Package vs Off The Plan

What is a House and Land Package?

A house and land package is when a purchaser enters into a contract for a block of land as well as a separate building contract to construct a house. You can choose to construct any plan of your choice, as long as it passes council requirements. Builders also typically provide the purchaser a range of home designs to choose from.

An advantage of these packages is that finance is secured at the beginning of construction. Plus, you are the owner of the property from the beginning. You also pay reduced stamp duty, as you are only paying stamp duty on the land.

A disadvantage of house and land packages is that the purchaser wears the holding costs during construction, before the house is completed. The purchaser is also required to make mortgage repayments during the build.

Pros:
  • Finance is secured at the beginning
  • Paying reduced stamp duty
  • Able to construct any plan of your choice
  • Eligible for First Homeowners Grant
Cons:
  • Having to wear the holding costs during construction before the house is completed
  • Harder to value
  • Required to make mortgage repayments during the build
What’s an Off The Plan contract?

An off the plan contract is when the purchaser enters into a single contract with a developer. This is also sometimes referred to as a 10/90 contract. For example, a purchaser is looking to buy a townhouse off the plan. So, in order for the development to get underway, typically a 10% deposit is required to secure the property.

As the townhouses aren’t built at time of getting a loan, the bank doesn’t have anything to value. Once the townhouses are built, the bank values the property prior to approving a loan. When the loan gets approved, the purchasers pays the remaining 90% at completion to the developer.

These contracts can be beneficial for buyers as they aren’t required to pay mortgage repayments during the build, as they get the loan approved at the end. This is an advantage for the buyer, as it also gives them an opportunity to have more time saving while their house is being built.

A disadvantage of an off the plan contract is that finance is not secured until completion. If finance falls through at completion, the purchaser could lose their initial deposit and the home. Another disadvantage is that the buyer is limited to the plans the developer has proposed. Whereas, with a house and land package, the buyer can construct any plan of their choice.

Pros:
  • Not required to pay mortgage repayments during build
  • Opportunity to save whilst house is being built
  • Secure property
  • Eligible for First Homeowners Grant
Cons:
  • Finance is not secured until completion
  • Limited to plans the developer has proposed
  • Risk of losing deposit if circumstances change

Which option is better? As everyone’s situation is different, for some it might be better to purchase a house and land package and others an off the plan contract. We hope this article helped clarify the difference between the two. If you would like to discuss which options is best for you, contact our team via calling 1300 846 956 or email admin@silvertail.com.au

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