Types of property to buy: How do you buy a land release block?

Types of property to buy: How do you buy a land release block?

The second in our series on buying different types of properties, we look at what a land release is and what's involved in getting finance to buy your own block

There's more than one way to get on the property ladder or make a property investment. Buying a block of land in a new land release is an option that might suit you.

What is a land release?

In a land release, new blocks of land become available for sale for the first time. These are usually on a residential estate owned by a property developer. You can buy house and land packages or land only.

Why would you buy land only?

Buying land only gives you the option of building your own home when you are ready, using the builder of your choice. You can build straight away or years later (depending on the terms of the purchase contract), and you can build a house that's perfect for your needs or as an investment property.

Do your due diligence

As well as doing your own checks, such as making sure the block is big enough for the house you want to build and that the price is in line with the price of similar blocks, it's essential you get independent professional advice before you sign anything. Engage a solicitor to read through the purchase contract.

As with any property purchase, you should research the area and keep up to date with the latest market information. Our Property Guide app lets you access the latest auction rates, clearance rates, sales histories and suburb profiles from across Australia.

How can you get finance?

Getting a loan for a land release block is different to getting finance for an existing property. You could take out a standard mortgage to buy the land, then take out a construction loan when you're ready to build.

Alternatively, a construction loan could cover both the land purchase and the building of the house.

How do construction loans work?

Money is released from your loan in stages, aligned to the different stages in the building of your home. This saves you money, as you only pay interest on the progress payments made until the loan is fully drawn.

Repayments on Construction loans are interest only until the building is completed and the loan is fully drawn, when repayments switch to principal-and-interest (or a 'formal' interest-only arrangement).

Thinking of buying a land release? Speak to one of our lending specialists today.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Commonwealth Bank of Australia ABN 48 123 123 124.