Quick answer
A land bank loan is short-term private finance that lets a developer buy, refinance or keep holding a site while approvals progress or the market turns. Vacant land is considered case by case, and the loan is often stronger when another existing property is added as security. Interest can be capitalised, so there may be no monthly repayments until the site is sold or refinanced.
Key points
- Funds the holding period on a development site, not the construction
- Vacant land and rural property are considered case by case
- Adding a completed home or commercial property can strengthen the position
- Capitalised interest means the land doesn't have to fund monthly repayments
- Exit is usually a sale, a joint venture or a refinance once approval is in hand
- Amounts
- $20k – $5m
- First mortgage term
- 1 to 24 months
- Security
- Land, plus other property if needed
- Valuation
- No formal valuation required
Some of the best development profits are made simply by holding the right piece of dirt for long enough. A site bought ahead of a rezoning, carried through a planning approval, or kept until a soft market recovers can be worth far more at the end than at the start.
The catch is that land earns nothing while you wait. A land bank loan pays for the waiting.
What is a land bank loan?
It is a short-term private loan used to buy, refinance or keep holding a development site, secured by a mortgage over the land itself, other property you own, or both. It covers the period between acquiring a site and either selling it or starting construction.
It is not a construction loan. Nothing is being built with the money, and the security is the land as it stands today, plus any completed property added to the deal. Once the project is ready to go, the construction lender takes over, and the land bank loan is typically repaid from that refinance or from a sale.
Land bank loans are used to:
- buy a site quickly when a bank won’t lend on undeveloped land
- refinance a bank that wants out of a land loan
- release equity from land already owned to fund approvals or another purchase
- carry a site through rezoning, subdivision or a DA
Can you borrow against vacant land?
Yes, but vacant land and rural property are considered case by case. Land is harder to sell than a finished home, and a lender has to be comfortable it could be sold within a reasonable time if needed. The factors that help:
| Factor | Stronger | Weaker |
|---|---|---|
| Location | Growth corridor, established suburb, near infrastructure | Remote, single-industry town |
| Zoning | Residential or mixed use, approval pathway clear | Uncertain zoning, major constraints |
| Services | Water, sewer and power at the boundary | No services, costly connections |
| Access | Legal road frontage | Landlocked or easement-dependent |
| Size and shape | A lot buyers in the area actually want | Irregular, flood-affected or steep |
There is no formal valuation required. The lender assesses the land directly, which suits sites that are hard to compare and spares you a valuer’s fee and waiting time.
When land on its own won’t support the amount you need, the common fix is to add another property, such as a completed home, an investment unit or a commercial building. Read how that’s structured on multiple properties as security, or run the numbers on the secured borrowing power calculator.
What does it cost to hold a development site?
Holding costs are the quiet killer of land deals. Plan for them before you commit:
- Land tax. Revenue NSW lists vacant land, including rural land, as liable for land tax. It is based on the unimproved value of the land, and the threshold is applied to holdings owned at midnight on 31 December each year. In Victoria, the SRO assesses land you own at midnight on 31 December on the total site value of your holdings, and all land is taxable unless an exemption applies.
- Vacant residential land tax (Victoria). The SRO has said this tax, which applies to residential property left vacant for six months or more in a calendar year, is being expanded to cover all of Victoria from 2025. Ask your accountant whether it touches anything in your portfolio.
- Council and water charges, insurance and fencing. Smaller items, but continuous.
- Interest. Which is where capitalising helps.
Capitalising interest means it is added to the loan instead of being paid monthly, so the land doesn’t need to generate cash flow to service the debt. It is arranged per deal, and you can read more under prepaid or capitalised interest.
If you’re already holding a site and the bank is getting restless, see what a private loan could do.
Illustrative example: carrying a site through approval
Illustrative: A Sunshine Coast developer owns a 4,000 square metre parcel zoned for medium density, bought several years ago and now debt-free. A DA for twelve townhouses has been lodged and is expected to be decided within the next six to nine months. The developer needs $400k to cover consultants, council fees and land tax through to approval, and their bank won’t lend on the land until construction is ready to start.
- Security: a first mortgage over the land
- Loan: $400k, with interest capitalised for the term
- Term: 12 months, chosen to cover the expected approval period plus a buffer
- Exit: a construction lender refinances the land loan once the DA is approved and the build is ready, or the approved site is sold
If the site alone had been too thin, the developer could have added their own home or another investment property to bring the total security up.
What exit strategies work for land?
A land bank loan is only as good as its way out. The common exits are:
- Sell the site with its approval. An approved site often attracts a wider pool of buyers. Note that the ATO lists potential residential land among the sales where GST withholding at settlement may apply, so factor that into the net proceeds.
- Bring in a joint venture partner who funds the next stage and repays the land loan.
- Refinance to a construction lender when the project is ready to break ground.
- Sell another asset in the portfolio and repay from those funds.
Pick the term to match. If the approval might take longer than forecast, choose a longer first mortgage term rather than hoping for an extension. See also the vacant land loans page for first mortgages over land that isn’t part of a development plan.
Does it matter who owns the land?
Plenty of development sites sit in a company, a unit trust or a family trust rather than in someone’s own name. That doesn’t stop a land bank loan, but it shapes the paperwork. The lender will want to see who controls the owning entity, the trust deed where there is one, and guarantees from the directors or other key people behind it. Mixing security across entities, such as land in a company plus a home held personally, is common and is handled case by case. The company or trust-owned property page sets out what’s typically requested.
Ask whether your site qualifies
You can find out where you stand without a credit check, and your enquiry stays with one direct lender, our lending partner fundU, rather than being circulated around a panel. A specialist who understands land and development reads it personally.
To get a reliable first answer, be precise: the address, zoning, approval status, what’s owing on the land and any other property you could add, and how and when you expect to exit. Begin your land bank enquiry and keep the site you’ve worked hard to secure.
Frequently asked questions
Can I borrow against vacant land on its own?
Sometimes. Vacant land is considered case by case, looking at location, zoning, access, services and how readily the site would sell. Where the land alone doesn't support the amount you need, adding another property you or your company own usually makes the deal work.
Does the land need a development approval first?
No. Land is funded at different stages, from raw sites awaiting a planning proposal through to approved, shovel-ready lots. An approval generally makes a site easier to sell or refinance, which strengthens the exit, but it isn't a precondition.
What is a typical exit for a land bank loan?
Common exits are selling the site with its approval, bringing in a joint venture partner, refinancing to a construction lender once the project is ready to start, or selling another property in the portfolio. The exit needs to be realistic within the loan term.
Is land tax payable on vacant land I'm holding?
Generally yes, unless an exemption applies. In NSW, vacant land including rural land is liable for land tax, based on the unimproved value, and holdings are counted at midnight on 31 December. Victoria taxes all land unless an exemption applies. Your accountant can confirm the position for your entity.
How long can I hold the land on a private loan?
Private first mortgages run for 1 to 24 months. Second mortgages and caveat loans are typically shorter. The term is chosen to fit the exit, such as the expected approval date or the planned sale campaign.