Vacant land loans are designed to help you purchase a block of land when you’re not ready to build just yet. Whether you’ve found the perfect spot for your future home or want to invest in land for future resale, a vacant land loan can help secure your property now while you plan for later.
What Are Vacant Land Loans?
A vacant land loan allows you to buy land that doesn’t currently have a dwelling on it. Lenders secure the loan against the land itself, similar to a traditional home loan. However, since land values can fluctuate and may take longer to sell, lenders often see these loans as higher risk.
To manage this risk, lenders may:
-
Offer a lower loan-to-value ratio (LVR)
-
Charge higher interest rates
-
Require larger deposits
Learn more about LVRs in our home loan guide
Vacant Land Loans vs. Construction Loans
A vacant land loan is used to purchase undeveloped land without any immediate building plans. In contrast, a construction loan is used when you plan to build soon. With construction loans, funds are released in stages as the build progresses. This process requires a building contract and detailed construction timeline.
Key Differences:
-
Vacant land loan: Buy land now, build later (or not at all)
-
Construction loan: Funds tied to active building stages
-
Time frame: Construction loans typically have stricter deadlines for drawdowns
Need help choosing the right option? Use our loan comparison tool
Eligibility Criteria for Vacant Land Loans
When you apply for a vacant land loan, lenders assess several key factors:
1. Your Borrowing Power
Lenders review your income, expenses, assets, and debts to assess whether you can repay the loan.
2. Land Size
-
Land under 2.2 hectares: You may borrow up to 95% of its value.
-
Land over 11 hectares: Loans often capped at 80% LVR.
3. Location and Infrastructure
Banks prefer land with road access, nearby utilities, and proximity to towns or cities.
4. Intended Use
Planning to live on the land increases your chances of approval. Pure investment purchases may face tighter restrictions.
5. Other Considerations
Zoning, land easements, and development restrictions can affect the lender’s decision. Always check local council regulations.
You can read more on land zoning laws at the Australian Government’s Planning Portal
Should You Choose a Vacant Land Loan?
If you’re not ready to build immediately but want to secure your ideal block, vacant land loans offer flexibility. However, expect stricter lending terms, higher interest rates, and more detailed eligibility criteria. Always compare lenders carefully and understand the total costs before you commit.
Use our Refinancing & Land Loan Checklist to ensure you’re making the right financial choice.
