Understanding the Basics of House and Land Packages

Buying a house and land package as a first home buyer in Devonport gives you access to specific grants and stamp duty savings that don't apply to established homes.

The Tasmanian First Home Owner Grant of $20,000 applies exclusively to new builds, which includes house and land packages. This grant, combined with the Australian Government 5% Deposit Scheme, means you can enter the market with a smaller deposit than most first home buyers realise. Understanding how these programs work together and how lenders assess house and land packages differently to completed homes will shape your budget and timeline from the outset.

How House and Land Packages Are Assessed for Finance

Lenders treat house and land packages as construction finance, not standard home loans. You'll need pre-approval for the total contract value, which includes the land and the build, but the funds are released in stages as construction progresses rather than as a single settlement.

This staged approach affects your repayments during construction. Most lenders charge interest only on the land component until the first progress payment is made, then interest accumulates on each draw as it's released to the builder. You won't move to principal and interest repayments until practical completion, which typically occurs six to twelve months after the build starts. If you're renting while construction is underway, you'll be managing rent and loan interest simultaneously during this period.

Lenders also require the builder to be registered and insured. In Tasmania, that means the builder must hold appropriate registration with Consumer, Building and Occupational Services. The construction contract needs to be a fixed-price contract, and the lender will review the builder's credentials before approving finance. Some lenders maintain preferred builder panels, while others assess builders on a case-by-case basis.

What the $20,000 First Home Owner Grant Covers

The Tasmanian First Home Owner Grant of $20,000 is available for eligible transactions from 1 July 2026, subject to assent. The grant applies to new homes only, which makes house and land packages one of the most common ways first home buyers access it.

To qualify, you must be purchasing or building a new home that has not been previously occupied as a place of residence. At least one applicant must be a natural person, and if you're applying jointly, at least one of you must be a first home buyer. You'll need to move into the property as your principal place of residence within twelve months of completion and live there continuously for at least six months.

The grant is paid on settlement of the land if construction has already commenced, or on the first progress payment if construction hasn't started yet. Most buyers apply the grant directly to their deposit or use it to cover early construction costs. You can't combine it with Help to Buy because Tasmania has opted out of that program, but it works alongside the Australian Government 5% Deposit Scheme without restriction.

Using the 5% Deposit Scheme for House and Land Packages

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit, and Housing Australia guarantees the difference between your deposit and 20% of the property value. No lenders mortgage insurance is payable, and there are no income caps or annual place limits.

For house and land packages, the property price cap in Tasmania is $600,000. That cap applies to the total contract value, not just the land component. Applications are made through participating lenders, and you can't apply directly to Housing Australia. The scheme works with construction loans structured for staged payments, which means the guarantee applies progressively as each draw is released.

Consider a buyer purchasing a house and land package in Devonport with a total contract value sitting at the current median for new builds in the area. With a 5% deposit under this scheme, they avoid paying lenders mortgage insurance, which on a 5% deposit would otherwise add several thousand dollars to the loan. The $20,000 grant can be used to increase the deposit, bringing the loan-to-value ratio down further and improving serviceability.

Participating lenders assess your income, expenses, and credit history in the same way they would for any home loan application, but the absence of lenders mortgage insurance makes a material difference to both upfront costs and borrowing capacity.

How Deposit Requirements Work During Construction

You'll need your deposit ready before land settlement, but how that deposit is structured depends on whether you're using the 5% Deposit Scheme or a conventional loan with a larger deposit.

Under the 5% Deposit Scheme, your deposit must be genuine savings or a gift from an immediate family member. Genuine savings means funds you've saved over at least three months, held in your own name. A gift from a parent or sibling is acceptable, but it must be a genuine gift with no expectation of repayment, and the lender will require a signed gift letter.

If you're putting down 10% or more without using the scheme, some lenders will accept a wider range of deposit sources, including the First Home Super Saver Scheme, equity from a guarantor, or proceeds from the sale of another asset. The First Home Super Saver Scheme allows you to make voluntary concessional and non-concessional contributions into your super fund and withdraw them later, along with associated earnings, to use toward your first home purchase. The maximum you can withdraw is $50,000, and there are annual contribution limits, so it requires advance planning.

Once construction begins, you won't need additional deposit funds, but you will need to cover each progress payment as it falls due. Those payments are typically drawn directly from the approved loan facility, so your cash flow planning shifts to managing interest costs and any rental payments during the build period.

Fixed or Variable Interest Rates for Construction Finance

Most lenders offer variable rates during construction and give you the option to fix once the loan converts to principal and interest repayments after completion. Some lenders allow you to lock in a fixed rate at the start of construction, but this is less common and may limit your ability to make additional repayments during the interest-only phase.

A variable rate during construction gives you flexibility to make extra payments without penalty, which can reduce the interest that accumulates while the build progresses. An offset account isn't typically available during construction because the loan is structured as a line of credit with progressive draws, but once the loan converts after completion, you can add an offset if your loan product supports it.

If you're planning to fix after completion, discuss rate lock options with your lender early. Some lenders allow you to lock in a rate up to 90 days before practical completion, which can protect you if rates rise during the final stages of construction. Others require you to wait until the loan converts, which exposes you to rate movements during that window.

Stamp Duty Considerations in Tasmania

The full stamp duty exemption that applied to first home buyers purchasing established homes in Tasmania for settlements between 18 February 2024 and 30 June 2026 has ended. No equivalent exemption for established homes is in place from 1 July 2026 under current Tasmanian law.

For house and land packages, stamp duty is payable on the land component only at the time of land settlement. The build component is not subject to stamp duty. Duty is calculated based on the dutiable value of the land, and the rate depends on that value. If the land is being purchased as part of a single contract that includes the build, the contract will specify the separate value attributed to the land for duty purposes.

Devonport's land prices vary depending on proximity to the CBD and the coast. Blocks closer to Mersey Bluff or within walking distance of the Devonport Showground typically carry higher land values than those in newer estates further south or west. The duty payable on the land portion can range from a few thousand dollars to significantly more depending on the specific location and size of the block, so factor this into your upfront cost planning.

Borrowing Capacity and Serviceability for First Home Buyers

Lenders assess your borrowing capacity based on your income, existing debts, living expenses, and the loan repayments you'll be making after construction is complete. They stress-test your application by calculating repayments at a higher interest rate than the actual rate you'll pay, typically adding a buffer of 3% or more.

If you're applying as a couple, both incomes can be included, but lenders will reduce the assessable income if one of you is on a contract, casual, or probationary employment. Permanent full-time or part-time employment with at least three to six months of payslips gives you the strongest serviceability position.

Existing debts reduce your borrowing capacity. Credit card limits are assessed as if you're using the full limit every month, even if you pay the balance in full. Personal loans, car loans, and buy-now-pay-later arrangements all reduce the amount you can borrow. If you're carrying a credit card with a $10,000 limit and you only ever use $1,000 of it, consider reducing the limit or closing the account before applying for pre-approval.

Your living expenses are also factored in. Lenders use either your declared expenses or a benchmark figure based on the Household Expenditure Measure, whichever is higher. If you're currently living at home with minimal costs, the lender will still assess you at the benchmark rate, which assumes you'll be covering all your own living costs once you move into the new property.

Timeline from Application to Completion

The timeline for purchasing a house and land package is longer than buying an established home because it includes both land settlement and construction. From the time you sign the contract to the time you receive the keys, expect nine to eighteen months depending on the builder's schedule and the complexity of the build.

Pre-approval should be in place before you sign the contract. Most lenders issue pre-approval valid for three to six months, and you can extend it if construction is delayed. Once the contract is signed, the lender will conduct a formal valuation of the land and review the building contract. Land settlement typically occurs four to eight weeks after contract exchange, assuming finance is approved and all conditions are satisfied.

Construction begins after land settlement, and progress payments are made at defined stages such as base, frame, lock-up, fixing, and practical completion. Each payment is triggered by a progress inspection, and the builder invoices the lender directly. The lender releases funds to the builder, and interest starts accruing on that portion of the loan.

Practical completion is when the build is finished and the property is ready to occupy. At that point, the loan converts from construction to a standard home loan with principal and interest repayments. You'll need to arrange building insurance before the first progress payment is made, and that insurance continues until settlement is complete.

Call one of our team or book an appointment at a time that works for you. We'll walk through your income, deposit, and timeline to make sure the structure fits your situation before you sign anything.

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