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Development Finance

Can You Finance Land And Construction Together?

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Quick answer

Yes, often under one facility

1 combined facility 2 stages

Land purchase first, then staged construction drawdowns

  • Typical structure Land + Build
  • Common repayment basis during build Interest only
  • How funds are released Progress claims
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Yes, in many cases you can finance the land purchase and the construction costs together under one overall facility.

This is common in Australia for house and land builds, duplexes, townhouses, small developments and some larger projects where the borrower wants one structured facility rather than one loan for the site and another for the build.

The land component is usually settled first, while the construction component is then drawn progressively as works are completed and verified

When can land and construction be financed together?

A combined land and construction facility is most suitable when the lender can clearly see the full project from acquisition through to completion

In practical terms, that usually means the borrower has or is close to having a suitable site, plans, a builder or building costings, and a realistic timeframe to commence construction

Typical scenarios where lenders may finance both together include:

  • iconVacant land being purchased with an immediate build intention
  • iconHouse and land packages or custom residential builds
  • iconDuplex, triplex or small multi dwelling developments
  • iconKnockdown rebuild projects
  • iconCommercial or mixed use projects with a staged construction budget
  • iconSites already owned where construction is being added into the same refinance and build facility

How Combined Land And Construction Finance Works

A combined facility is usually approved with one total limit, but the funds are not advanced all at once

At settlement, the lender advances the land component. The remaining approved funds are then held for the build and released through progress payments during construction.

Depending on the lender and project type, the structure often looks like this:

  • 01 Land settlement or refinance of the site
  • →
  • 02 Site works and slab
  • →
  • 03 Frame
  • →
  • 04 Lock up
  • →
  • 05 Fit out or fixing
  • →
  • 06 Practical completion

A lender, valuer, quantity surveyor or other approved certifier will usually confirm each completed stage before the next drawdown is released.

How Lenders Assess A Combined Facility

When land and construction are financed together, lenders usually assess the deal using one or more of the following methods:

Method 01

As is and on completion value

The lender looks at the site value today and the expected end value once the project is complete

Method 02

Total project cost and equity contribution

The lender compares land cost, build cost, fees, contingency and interest against the borrower's cash or equity contribution

Common facility structure Land first, build second
  • One approval can cover both the site and the build
  • Construction funds are usually retained and released only as progress claims are approved

For straightforward residential builds, some lenders allow land and construction to be combined quite cleanly. For larger or more specialised developments, they will examine equity, feasibility, builder strength, time to completion and exit strategy in much more detail.

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What You Usually Need Before A Lender Will Combine Them

Before approving one facility for both land and construction, lenders usually want enough evidence that the build can commence and finish within policy

That assessment is not only about value. It is also about timing, cost certainty, builder quality and the borrower's capacity to complete the project

Documents and inputs often include

  • iconContract of sale or evidence of site value
  • iconFixed price building contract or detailed costings
  • iconPlans, specifications and consultant reports
  • iconCouncil approvals or a clear pathway to approval
  • iconContingency allowance for overruns and delays
  • iconEvidence of funds to complete and equity contribution
  • iconValuation including as is and on completion assessment
  • iconExit strategy such as sale, refinance or long term hold
1  facility
The stronger the documentation, the easier it is for a lender to approve one combined facility rather than asking you to settle the land first and come back later for the construction component.

Do You Always Need Separate Loans?

Not always. Whether the land and build can sit under one facility depends on the type of project, the stage of approvals and how much certainty the lender has around the build

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When one loan is common

Combined facilities are common where the land is being acquired now and the build is ready to start, with acceptable plans, builder documents and funding buffers already in place.

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When separate finance may still happen

If approvals are not ready, building costs are not settled, or the project is too early stage, some borrowers use land finance first and then refinance into construction or development finance later.

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When pre sales still matter

For larger developments such as apartment or mixed use projects, lenders may still require pre sales, quantity surveyor oversight and stronger covenants even where land and construction are approved together.

Common reasons combined finance is delayed

Many borrowers assume that if a lender will fund the land, it will automatically fund the construction as well. In reality, the combined structure can break down when key parts of the file are incomplete

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Not enough contribution at land settlement

Even if the full facility is approved, the borrower may still need to contribute funds or equity upfront before construction drawdowns begin

Possible solutions include:
  • icon Use existing property equity to strengthen the deal
  • icon Reduce land debt or contribute more cash at settlement
  • icon Restructure the project to fit lender policy and buffers
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Approvals are not far enough advanced

Some lenders will not combine land and construction unless council approvals, stamped plans or a clear build pathway are already in place

If approvals are not yet in place, borrowers may need to secure:
  • icon Land finance first, then construction later
  • icon Alternative lenders willing to fund earlier stage sites
  • icon A staged approval subject to specific milestones
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Build costs are uncertain or too thinly supported

Without a strong fixed price contract, sensible contingency and realistic timeline, lenders may separate the land loan from the construction risk

Detailed costings, builder due diligence and a sensible contingency can materially improve the file.
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Wrong loan type for the project

A standard residential construction loan may suit a simple home build, while a true development facility may be needed for multi unit or more complex projects

Solutions may include:
  • icon Match the project to the correct lender category
  • icon Use a lender that understands small development finance
  • icon Present the exit strategy clearly from the start
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Steps To Finance Land And Construction Together

Step

01

Work out the full site purchase and construction budget

Step

02

Gather plans, specifications, builder quotes or a fixed price contract

Step

03

Confirm your deposit, equity contribution and contingency funds

Step

04

Apply for a lender or broker assessment of the combined structure

Step

05

Complete valuation, approval and land settlement

Step

06

Draw the build component progressively as each stage is completed

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Speak with a Development Finance Specialist

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Whether land and construction can be financed together depends on the site, the build, the approvals, the borrower profile and the chosen lender.

A specialist can help determine whether one combined facility is realistic or whether a staged land first and construction later structure will be more achievable.

Speak with a finance specialist about combining land and construction finance.

Submit the short form below and a development finance specialist will review your project, structure and funding pathway.

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