Buying Land to Build Townhouses in Queensland
If you're looking at purchasing suitable land to build townhouses in Queensland, you'll need specialized construction finance that differs from standard home loans. Whether you're planning a small development of two or three townhouses or a larger project, understanding how land and construction packages work is essential for bringing your vision to life.
At LBK Lending, we help Queensland clients access construction loan options from banks and lenders across Australia, making it possible to turn empty blocks into quality construction projects.
What Makes Townhouse Construction Different?
Building townhouses isn't the same as building a single dwelling. You're essentially undertaking a small-scale development, which means lenders assess your application differently. Here's what you need to know:
- You'll need council approval and a development application before construction begins
- Lenders want to see detailed council plans showing the entire development
- Your registered builder must provide a fixed price building contract for the work
- The loan amount typically covers both the land purchase and construction costs
Most lenders require you to commence building within a set period from the Disclosure Date, usually between 6 to 12 months after settlement on the land.
How Construction Finance Works for Land and Build Projects
A land and construction package combines two elements: funding to purchase the land and construction funding to complete the build. Here's how the process typically unfolds:
Land Purchase Stage
You'll first settle on the land purchase. During this period before construction starts, you'll typically make interest-only repayment options on just the land component. This keeps your costs manageable while you're finalizing plans and waiting for council approval.
Construction Stage
Once you commence building, your construction loan operates on a progressive drawdown system. This means lenders only charge interest on the amount drawn down at each stage, not the full loan amount. This structure helps keep your interest costs lower during the build.
Understanding the Progressive Payment Schedule
Construction loans work through progress payments rather than handing over all funds at once. Your lender releases money according to a construction draw schedule, typically in five or six instalments as work progresses:
- Base stage (foundations and slab)
- Frame stage (timber or steel frame erected)
- Lock-up stage (roof, windows, doors installed)
- Fixing stage (internal fit-out, cabinets, tiles)
- Practical completion (final touches and handover)
Before releasing each payment, lenders conduct a progress inspection to verify work has been completed to standard. This protects both you and the lender, ensuring funds match actual construction progress.
Ready to get started?
Book a chat with a Finance & Mortgage Broker at LBK Lending today.
Cost Structures: Fixed Price Contracts vs Cost Plus
When building townhouses, you'll typically work with fixed price contracts rather than cost plus arrangements. Under a fixed price building contract, your builder quotes a set price for the entire project, giving you certainty about construction costs.
With a cost plus contract, you pay for actual costs plus the builder's margin. While some owner builder finance arrangements use this structure, most lenders prefer fixed price contracts for townhouse developments as they provide clearer budget parameters.
Fees and Interest Rates to Consider
Construction finance comes with specific costs:
Progressive Drawing Fee
Lenders charge a Progressive Drawing Fee each time they release funds and conduct a progress inspection. This typically ranges from $200 to $400 per drawdown.
Construction Loan Interest Rate
The construction loan interest rate may be slightly higher than standard home loans, reflecting the additional complexity and risk. However, remember you're only paying interest on drawn funds during construction.
Additional Payments
Some lenders allow additional payments during construction, which can reduce your overall interest costs.
What Lenders Look For in Townhouse Projects
When assessing your construction loan application for townhouse development, lenders examine:
- Your borrowing capacity to service the loan amount during and after construction
- The suitability of the land for the proposed development
- Quality of the registered builder and their track record
- Comprehensive council plans and development application approval
- Your ability to manage progress payment finance throughout the build
- Whether your builder has appropriate arrangements with sub-contractors, including plumbers and electricians
Can You Use Construction Loans for Other Property Projects?
While this article focuses on townhouse construction, construction finance can also support various other projects:
- House & land packages for single dwellings
- Spec home finance for building to sell
- Custom home finance for unique designs
- Off the plan finance (though this differs from construction loans)
- House renovation loan or home improvement loan for major renovations
- Project home loan for standard builder designs
If you're interested in other property investment opportunities, you might also want to explore investment loans or speak with us about your specific situation.
The Application Process for Land and Build Loans
Applying for new home construction finance requires more documentation than standard home loans. You'll need:
- The land contract of sale
- Your building contract with the registered builder
- Approved council plans and development application
- Progress payment schedule from your builder
- Detailed costings for the entire project
- Evidence of your income and financial position
Working with a Renovation Finance & Mortgage Broker who understands construction projects can smooth this process considerably. At LBK Lending, we know which lenders support townhouse developments and can prepare your application to address their specific requirements.
Why Choose LBK Lending for Your Townhouse Construction Project
As Queensland-based specialists, we understand the local market and council requirements across the state. We access construction loan options from banks and lenders across Australia, meaning we can find construction funding that matches your project parameters.
Whether you're building your dream home as multiple townhouses for your family, creating custom design townhouses to sell, or starting your property development journey, we're here to help you understand your options.
Our team can assess your borrowing capacity for construction projects and explain how construction to permanent loan products transition from the build phase to standard home loans once construction completes.
Ready to discuss your townhouse construction plans? Call one of our team or book an appointment at a time that works for you. We'll talk through your project, explain your construction finance options, and help you take the next step toward building your new home or investment property.
