How to finance a house and land package

Construction Finance Built Around Your Professional Timeline

A construction loan for a house and land package works differently to a standard home loan because the property you're buying doesn't exist yet. The lender releases funds in stages as the build progresses, and you only pay interest on the amount drawn down at each stage. For prosthodontists managing income from complex case work that can span multiple months, this structure means your repayments remain proportional to the funds actually advanced until the build is complete.

Most lenders structure construction finance as a construction to permanent loan, which converts automatically to a standard principal and interest or interest-only home loan once the building receives final council approval and you settle. The application process requires both the land contract and a fixed price building contract with a registered builder, along with council approval for the development application. Lenders assess your borrowing capacity based on the total loan amount, not just the initial land purchase, so your income documentation needs to support the full project cost from the outset.

Progress Payment Finance and the Drawdown Schedule

The construction draw schedule determines when funds are released to your builder. Lenders typically work on a five or six stage progressive payment schedule: land purchase, base or slab, frame, lock-up, fixing, and practical completion. Each stage requires a progress inspection by the lender's valuer before the funds are released. The builder submits an invoice, the lender arranges the inspection, and once satisfied that the work matches the claimed progress, they release the payment directly to the builder.

You pay interest only on the amount drawn down. If your land cost $180,000 and your first progress payment after the slab is $90,000, you're only servicing interest on $270,000, not the full loan amount. This can be helpful when you're still leasing a clinic room or working as a senior clinician and your income is allocated across current living costs and the construction project. The construction loan interest rate during the building phase is usually variable, though some lenders offer fixed rate options once you convert to the permanent loan.

Most lenders charge a progressive drawing fee each time funds are released, typically $300 to $500 per drawdown. Over six stages, that adds between $1,800 and $3,000 to your overall project cost, so factor that into your budgeting alongside your deposit and settlement costs.

How the Construction Loan Application Differs

Lenders want to see that your builder is registered, that the building contract is a fixed price contract, and that you're required to commence building within a set period from the disclosure date, usually six to twelve months. If you're buying a house and land package from a developer, the land contract and building contract are often issued together, and the developer will have already secured council plans and development approval, which satisfies most lender requirements without additional legwork on your part.

For prosthodontists working in private practice or planning to establish a new clinic, lenders assess your income the same way they would for any home loan for prosthodontists, but they'll also consider whether your current lease or living arrangement allows you to service the construction loan while you wait for the build to complete. If you're in a high-value postcode now and planning to move to a growth suburb with lower holding costs, that transition needs to be documented clearly so the lender understands your cashflow through each stage of the project.

When the Build Timeline Affects Your Loan Structure

Construction timelines have stretched in recent years due to labour shortages, supply delays, and council processing times. A build that was quoted at seven months might take ten or eleven. During that period, you're paying interest on progressive drawdowns and potentially still covering rent or another mortgage. Some lenders allow you to capitalise the construction interest into the loan rather than paying it monthly, which preserves your cashflow but increases the total debt you're servicing once the loan converts.

Consider a prosthodontist who purchased land in a new estate and signed a fixed price building contract for a total project cost of $720,000, with a 10% deposit on the land and access to construction loan options from banks and lenders across Australia. The land settled at $220,000, and the build was scheduled over eight months. By month five, supply delays pushed the lock-up stage out by six weeks. Rather than paying monthly interest on the drawdowns already made, the borrower elected to capitalise the interest, which allowed them to maintain income allocated to practice equipment purchases without disrupting their build financing. Once the final inspection cleared and the loan converted, the capitalised interest was absorbed into the permanent loan amount, and the monthly repayment settled at a level consistent with the original borrowing capacity assessment.

Fixed Price Contracts and Cost Plus Structures

Most lenders will only approve construction finance for house and land packages if the building contract is a fixed price building contract. This protects both you and the lender from cost blowouts during the build. A cost plus contract, where you pay the builder's actual costs plus a margin, introduces uncertainty around the final loan amount and makes it difficult for the lender to assess your serviceability upfront. If you're considering a project home loan with a volume builder offering a house and land package, the contract will almost always be fixed price, and the inclusions will be clearly specified.

If you want custom design elements or upgrades beyond the standard package, those need to be documented in the contract before you submit the loan application. Lenders assess the loan amount based on the contracted build price, and if you add $40,000 in upgrades after approval, you'll need to cover that from your own funds unless you apply for a variation, which most lenders are reluctant to approve once construction has commenced.

What Happens When the Build Is Complete

Once your builder reaches practical completion and the property passes final council inspection, the construction loan converts to a permanent loan. At this point, you'll typically move from interest only repayment options to principal and interest repayments, though some lenders allow you to continue interest-only if you're holding the property as an investment or if your professional circumstances support that structure.

The conversion happens automatically for most construction to permanent loan products. The lender conducts a final valuation to confirm the property's completed value matches or exceeds the loan amount, and the loan reverts to the standard terms agreed at the outset. If you've been capitalising interest during construction, the loan balance will be higher than the original contracted amount, so confirm the final figure before the conversion date and make sure your repayment budget reflects the updated balance.

If you're planning to use equity from this build to fund a future investment property purchase or to establish a clinic, the completed valuation is the figure lenders will use when assessing your borrowing capacity for the next project. A well-located house and land package in a growth corridor can deliver meaningful capital growth even before you move in, particularly if the estate infrastructure and surrounding development have progressed faster than anticipated.

For prosthodontists building a new home while managing the demands of complex restorative case work, construction finance offers a staged funding model that aligns with how the project actually unfolds. The key is making sure your loan structure, your builder's progress payment schedule, and your professional income all work in sync from land settlement through to final occupation.

Call one of our team or book an appointment at a time that works for you. We'll walk through your build timeline, your deposit position, and the lender options that match both your current income and where your practice is headed.

Frequently Asked Questions