Buying a brand-new property is an exciting milestone. Whether you’re building your dream home, purchasing a turnkey property, or securing an off-the-plan apartment, it’s easy to focus on the finished product.
What many buyers don’t realise is that not all new builds are financed the same way.
The type of property you’re purchasing can affect your loan structure, when funds are released, and how your lender assesses the application. Understanding these differences before signing a contract can help you avoid unexpected surprises later in the process.
1. Traditional House & Land Package
A traditional house and land package typically involves purchasing the land first and then entering into a separate contract with a builder to construct your home.
This usually includes:
- Purchasing the land and building a new home
- Separate contracts for the land and the construction
- Settlement on the land first, followed by construction
How is it Financed?
In most cases, you’ll require a construction loan.
Rather than receiving the full loan amount upfront, your lender releases funds progressively as the builder completes each stage of construction. These are commonly known as progress payments.
Because construction can take several months, lenders will also assess your borrowing capacity with the build timeline in mind.
2. Turnkey House & Land Package
A turnkey package works differently.
Instead of managing the construction process yourself, the builder completes the home before settlement. When you receive the keys, the property is generally ready to move into.
A Turnkey Package Often Includes:
- The land
- A completed home
- Flooring, landscaping, driveways and other inclusions
How is it financed?
Unlike a construction loan, a turnkey property is generally financed with a standard home loan at settlement.
The process is often similar to buying an off-the-plan property, with one important consideration: the lender will rely on a valuation at settlement to determine the property’s value.
3. Buying Off-the-Plan
Buying off the plan means purchasing a property before construction has been completed.
This may include:
- Apartments
- Townhouses
- House and land developments
When purchasing off the plan, you’re buying based on plans, specifications and design documents, with settlement occurring once construction is finished.
How is it financed?
Finance is usually finalised closer to settlement rather than when you first sign the contract.
At that stage, the lender will assess the completed property’s value. If market conditions have changed during construction, it may affect your borrowing position or the amount the lender is prepared to finance.
Why Finance Planning Matters Before You Sign
Signing a contract is only one part of the property journey. Your finance strategy should be considered before making any commitments.
Some of the key questions to ask include:
- How much deposit will I need?
- When will my loan funds be required?
- Will my borrowing capacity still support the purchase at settlement?
- Could valuation changes affect my finance approval?
- Which loan structure best suits this type of purchase?
Remember, while your contract may be signed today, your financial circumstances, lending policies and property values can all change before settlement.
The Bottom Line
Every new property purchase comes with different lending requirements. Understanding how each type of purchase is financed can help you make informed decisions and avoid unnecessary delays or surprises.
If you’re considering buying a new build, a turnkey home or an off-the-plan property, it’s worth speaking with a mortgage broker before signing the contract. Getting the right advice early can help ensure your finance is structured appropriately from the outset.
If you’d like to discuss your options or understand how your next property purchase could be financed, feel free to get in touch.