Owning a home is a dream come true for many people, particularly when it's a stunning new-build that features all the modern conveniences and contemporary style you would expect from a residence that's been designed and built in the 21st century. That said, buying a home is a significant purchase to make (for most people, it's the biggest purchase they will make in their lifetime).
For this reason, it's vital that home buyers take the time to consider all the information they may have available regarding a property before pushing ahead with the purchase.
What is a house and land package?
Generally, house and land packages are offered in a new development or land release that the developer has purchased from either the government or privately. The developer is responsible for providing the infrastructure (roads, utilities, water and sewerage) for the new area and then offer either;
Completed homes as a house and land package OR
House designs that you can select from and customise to suit the land you are purchasing
Whether you are intending to opt for a house that's already been constructed, or are considering an off-the-plan choice, the following considerations are well worth thinking about before you sign on the dotted line.
How to choose your home design - green, stylish and future-proof
Your home isn't just a place to live in the here and now, it's also an asset, as well as being somewhere you may spend the rest of your life. For these reasons, it's important to think about not only how relevant the design is to your current circumstances, but also how appropriate it will be for you in the years ahead.
Will the house be suitable as your circumstances change, whether you plan to have a child or more children, pets or will you need more space for in-laws or visitors? Can you easily change a room to become an additional bedroom if you need it later on?
Is the house cheap to cool in summer and heat in winter? Spending a little more on insulation during the build phase may well save you in electricity costs. Cheaper build options maybe a good idea initially, but you may regret those choices when they don’t deliver the results you thought they would.
It's also important to consider how appealing other buyers may find the property, should you choose to sell up at a later date. Is the property likely to appreciate, or does the design have some significant flaws? The reality is, sometimes life throws you lemons, and even if you swore you would never sell, circumstances can change, and you may find yourself listing the property for sale sooner than you thought you would. So, always keep in the back of your mind how ‘sellable’ your property is. If you’ve decided on a purple kitchen, be aware this isn’t everyone’s cup of tea, and you might have to refurbish before selling, or accept a lower sale price.
Don't be tempted to overlook a major design fault in order to buy cheap; the price you can command for your home when you decide to sell it could be seriously compromised.
Always read the fine print of the build contract and confirm what is included and what isn’t. There could be other considerations that you need to budget for as some builders include fencing, driveways, landscaping, garaging, carpets and clotheslines in the listed price, but others do not.
Budget blow out
Before you start choosing the marble floor tiles and polished brass taps, make sure all the essential items are budgeted for before you start adding the styling extras. Keep in mind, property valuations only consider the finishes to a certain extent so if there are shortfalls in the valuation of the property, you may need additional funds to cover the cost of the construction or land purchase.
How does the finance work for your house and land package?
If you’ve decided to purchase a fully completed house in a new estate, the finance process is generally the same as a normal purchase. However, as the new home may be in a new suburb or an area that doesn’t have any comparable sales data, the property valuation may be subject to variation. Particularly in Sydney where property growth has slowed and some property valuations are coming in lower than the purchase price.
The good news is, an experienced mortgage broker like Mint Equity will be able to advise which lenders are using property valuers who provide the most favourable valuations, and actually do their research on the property market rather than just a desktop valuation.
For a land and construction method, the finance process is a little different. There is usually two contracts, one for the land, and one for the build. These can be done at the same time, or later, depending on whether the build contract price has been confirmed. Once the land has been purchased, the finance for the construction is draw down gradually to align with the build progress. The good thing is that mortgage repayments are lower during the build phase, but as you can’t live in the property during construction, you’ll need to pay rent during this time to live elsewhere.
Beware of house and land package promotions
Be suspicious of house and land packages which are offered with promotional giveaways or at a significant discount. In some cases, the discount could be offered because the properties aren't particularly desirable, or are unlikely to appreciate significantly. In other cases, you may pay less up front, but end up paying more further down the line. Caution and plenty of research is advised before deciding on a particular property package.
What size property is going to suit you best?
A property that grows upwards rather than outwards is likely to utilise the land space better. That said, a single level property is an attractive proposition for older home buyers or those who like the convenience of no stairs. It's important to consider your own personal circumstances when deciding on a house and land package - there is no single property solution to suit everyone. By taking some time to decide on what's right for you, you stand the best chance of ending up with a home that works for you and your family.
Contact our house and land package finance specialist
House and land package finance is a little different to your standard home loan, so it’s worth speaking with an experienced mortgage broker at Mint Equity.