Why House & Land Packages Work for First Home Buyers

Why House and Land Packages Make Sense for First Home Buyers in Hillarys

A house and land package splits your purchase into two contracts: one for the land and one for the build. This structure opens up several finance and government scheme advantages that don't apply to established homes. In Hillarys and surrounding suburbs, where median house prices have climbed steadily, being able to access higher stamp duty thresholds and government equity contributions can mean the difference between buying now or waiting another year.

The northern coastal corridor has seen consistent demand from young families and professionals who want proximity to the coast without the premium of beachfront suburbs further south. House and land packages in estates near Whitfords Avenue and between Hepburn Avenue and West Coast Drive offer new buyers a chance to enter the market with modern builds, builder warranties, and lower immediate maintenance compared to older stock in the area.

How the Deposit Works on a House and Land Package

You pay the deposit on the land component first, usually 10% of the land price. The build deposit is typically much smaller, often around $1,000 to $5,000, and is paid to the builder separately. The rest of the build cost is drawn down progressively as construction reaches specific stages, with the lender releasing funds directly to the builder at each milestone.

Consider a buyer purchasing a house and land package where the land is priced within the current market range for estates north of Hillarys and the total package sits comfortably under Western Australia's stamp duty and grant thresholds. Using the Australian Government 5% Deposit Scheme, they put down 5% on the land value rather than 10%, which reduces the upfront cash required and allows them to retain savings for other settlement and build-stage costs. The Australian Government 5% Deposit Scheme covers the gap between their deposit and 20%, so they avoid paying Lenders Mortgage Insurance. Because they're building new, they also qualify for the $10,000 Western Australian First Home Owner Grant and the full stamp duty exemption that applies to new builds in the Perth metro area, with no price cap on residential land.

Stamp Duty Concessions and Grants for House and Land Buyers in WA

Western Australia removed the price cap on stamp duty concessions for first home buyers purchasing new homes or vacant land from 1 May 2025. If you're buying a house and land package in Hillarys, you can access a full stamp duty exemption on the land component regardless of price, provided the purchase is for residential land and you intend to build your home on it. For established homes, stamp duty concessions phase out above $700,000 in the Perth metro area, but that cap doesn't apply to new builds or vacant land.

The $10,000 First Home Owner Grant applies only to new homes and has different price thresholds depending on location. South of the 26th parallel, which includes Hillarys, the cap is $750,000. Most house and land packages in the northern suburbs fall within that range, so buyers can claim both the grant and the full stamp duty exemption at the same time. That combination can save around $20,000 to $30,000 in upfront costs compared to purchasing an established property at a similar price point without concessions.

Using Help to Buy or the 5% Deposit Scheme

Help to Buy allows the government to contribute up to 40% of the purchase price for a new home, with the buyer holding a minimum 2% deposit. The government takes an equivalent equity share and is repaid when the property is sold or when the buyer buys back that share over time. Income caps are $100,000 for individuals and $160,000 for couples or single parents, and property price caps apply depending on location. In Perth, the cap sits above the median for most house and land packages in Hillarys.

You can't combine Help to Buy with the 5% Deposit Scheme, so you need to choose which suits your situation. Help to Buy reduces the amount you borrow but gives the government a share of any capital gain. The 5% Deposit Scheme lets you borrow more and keep full ownership from day one, but your loan size is higher and you're exposed to the full value of any rate rises. For buyers with steady income who expect to stay in the property long-term, the 5% Deposit Scheme often works out more favourably. For those who want to minimise their loan size and monthly repayments in the short term, Help to Buy can be worth considering, especially if income is closer to the cap.

How Construction Drawdowns Affect Your Loan Structure

Once the land settles, you'll start paying loan repayments on that portion immediately, even though construction hasn't begun. During the build, your lender releases funds to the builder at predetermined stages: base stage, frame stage, lockup, fixing, and practical completion. Most lenders charge interest only on the amount drawn down so far, so your repayments increase as each stage is completed.

Some lenders offer a land loan with no repayments during construction, rolling the interest into the total loan balance. Others require interest-only payments from land settlement onward. The structure you choose depends on whether you're also paying rent during the build and how much cash flow you have available during that period. It's worth comparing construction loan options from multiple lenders, as policies and rates vary significantly. Not all lenders participate in government schemes, so if you're relying on the 5% Deposit Scheme or Help to Buy, your choice of lender is narrowed to the participating panel.

What Happens If Your Build Takes Longer Than Expected

Most builders quote a construction period of around six to nine months, but delays due to weather, supply issues, or labour shortages can extend that timeline. If your build runs over and you've locked in a fixed rate on your land loan, that fixed period might expire before the house is finished. You'll roll onto a variable rate for the remainder of the build, and then need to decide whether to refix once construction is complete.

In one scenario, a buyer locked in a fixed rate on the land portion but faced a four-month delay due to materials availability. The fixed term expired during lockup stage, and they moved to a variable rate for the final two stages. Once the build reached practical completion, they refixed the full loan amount at the rate available at that time, which had shifted slightly higher. The lesson there is to build a buffer into your timeline and consider whether fixing the land portion makes sense if your build period is uncertain. Some buyers prefer to stay variable during construction and fix once the full loan is drawn down, which gives more flexibility if the build runs long.

Fixed or Variable Rate During Construction

During the build, you're only paying interest on the amount drawn down so far, which changes every few weeks as each stage completes. Most lenders don't allow you to split between fixed and variable during construction because the loan balance is moving. Once construction finishes and the final drawdown is made, you can choose to fix part or all of the loan, stay fully variable, or split between the two.

A variable rate during construction gives you flexibility if you want to make extra payments or if the build takes longer than expected. A fixed rate on the land portion can provide certainty on repayments while you're managing rent or other commitments, but it locks you in for that portion only. Once the build is done and you move in, the decision becomes the same as any other home loan: do you want certainty on repayments for a set period, or do you want the flexibility to make extra payments and access features like an offset account.

Offset Accounts and Redraw on a Construction Loan

Most construction loans don't offer full offset functionality during the build because the loan balance is still being drawn down. Some lenders provide a partial offset on the land portion only, while others don't offer offset at all until construction is finished. Redraw is usually available during construction, but policies vary between lenders and some charge fees for each redraw transaction.

Once your build is complete and you've moved into repayments on the full loan amount, offset accounts and redraw work the same way they do on any other home loan. If you're holding savings or expect to build up cash reserves over time, an offset account linked to a variable portion of your loan will reduce the interest you pay without locking those funds away. If you prefer to pay down the loan directly and access those funds only when needed, redraw on a variable loan can do a similar job, though it's generally less flexible than offset.

What Lenders Look for in a House and Land Application

Lenders assess house and land packages differently to established homes because they're lending against a property that doesn't exist yet. They'll value the land based on comparable sales in the area and assess the build contract separately, checking that the builder is registered and insured and that the contract price is consistent with the scope of work.

Your home loan application will need to show steady income, manageable existing debts, and enough savings to cover the deposit plus costs. Lenders apply the same serviceability tests as they do for any other loan, but they'll also check that you can afford repayments on the land portion while the build is underway, especially if you're still renting. If you're using genuine savings, most lenders want to see at least three months of consistent savings behaviour. If you're using a gift from family, some lenders accept that without requiring a matching savings history, but policies differ depending on whether you're using a government scheme.

Because house and land packages involve two contracts, your solicitor or settlement agent will manage two separate settlement processes. The land settles first, and the build contract is signed with the builder after that. Your lender will want a copy of both contracts before they issue final approval, and they'll usually send a valuer to inspect the land and review the build contract before committing to the full loan amount.

Why You Should Consider Pre-Approval Before Choosing a Package

Getting pre-approval before you sign a contract gives you a clear view of what you can borrow and which lenders will support the package you're considering. Not all lenders work with all builders, and some have restrictions on estates or locations they'll lend against. If you sign a contract and then find out your preferred lender won't support it, you're either locked into a different lender with less favourable terms or you risk losing your deposit.

Pre-approval also locks in your borrowing capacity for a set period, usually three to six months, which gives you time to choose a package and negotiate with the builder without worrying that your circumstances or lending criteria will change before you settle. If you're relying on the 5% Deposit Scheme or Help to Buy, getting confirmation that you meet the eligibility requirements and that the package you're considering falls within the price caps is a necessary step before you commit.

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