Why Riverstone Buyers Should Plan Land Finance Early

Buying commercial land is financed differently from buying a house, and the loan structure you choose will shape your costs for years. If you are a Riverstone business owner or investor looking at a vacant block, settle the structure before you sign the contract.

At KM Financial Service, we are a mortgage broking team that works with local businesses and investors across north-west Sydney. This article covers what lenders look at, how repayments can change, and when to start the conversation.

How Does a Commercial Land Loan Work?

A commercial land loan is a secured loan used to buy vacant or undeveloped land for business, investment or future development. The land itself usually becomes the collateral, and lenders assess both the block and your ability to service the debt.

Lenders treat vacant land as a different risk from a built property, because there is no building producing rent or housing a business. Many lenders therefore set a lower loan-to-value ratio (LVR) for land than for a finished commercial property. The exact limit depends on your lender, your deposit, the land's zoning and your financial position, so a broker comparing lenders across Australia is useful here. Our commercial loans page outlines the options we arrange.

The trade-off is a larger deposit. A lower LVR means more of your own capital goes into the purchase before any building starts.

What Do Lenders Look at When You Buy Commercial Land?

Lenders look at the land's valuation, its zoning and intended use, your deposit, and your income from the business or other assets. The valuation matters most because it sets how much the lender will advance, and it can come in below the contract price.

If the valuation falls short, you must cover the gap from your own funds. Ask your broker about this risk before you exchange contracts. Lenders also want to know your plan for the land. Holding it, leasing it or building on it all lead to different assessments, so a clear plan helps your application.

If you want a sense of your starting position, check your borrowing capacity first. Business income, existing debts and other property you own all feed into that figure.

Interest-Only or Principal and Interest on Land?

Interest-only repayments keep early cash flow lower, while principal and interest reduces the debt from day one. Interest-only suits a holding or planning period, but it does not reduce what you owe and repayments rise when it ends.

Here is an illustrative example at 6.75% p.a., used for both options. On a $1,000,000 loan over 25 years, interest-only repayments are about $5,625 a month. Principal and interest repayments over the full 25 years are about $6,909 a month.

The step-up is bigger than many buyers expect. Say you take interest-only for the first two years and then switch to principal and interest. The remaining term is 23 years, so the new repayment is about $7,144 a month at the same 6.75% p.a. That is roughly $1,500 a month more than during the interest-only period. The rate is for illustration only, and your actual rate will depend on your lender, deposit and loan structure. Use a repayment calculator to test your own numbers.

Buying Land Now and Building Later: A Worked Scenario

Consider a Riverstone business owner who wants to buy an industrial block and build a workshop and storage facility. Approvals will take around two years, so the owner needs a loan that suits a quiet holding period and a later build.

The situation: the owner could cover repayments during the approval stage, but not a full principal and interest load while also paying for design and council fees. The solution: the broker structured an interest-only land loan for the first two years, with a plan to move to principal and interest afterwards. They also lined up a construction loan to be drawn progressively as building stages were completed. Progressive drawdown means the owner only pays interest on the funds released so far, not on the full build cost from the start.

The outcome: because the owner knew about the step-up from about $5,625 to about $7,144 a month (at the illustrative 6.75% p.a.), they budgeted for it from the start. They set money aside during the interest-only period instead of being surprised later. The main trade-off was that the land debt had not reduced by the time the build began, and a lender can reassess the loan at that point.

Riverstone Land Buyers: What to Check Locally

Riverstone sits in the Blacktown local government area under postcode 2765, so council zoning and approval requirements for your block will come from Blacktown City Council. Check zoning, permitted uses and servicing with the council before you commit.

The permitted use affects what you can build, and it can also affect how a lender views the land. Ask your solicitor and a town planner to confirm the details before you rely on any assumption about future development. If you also own a home or other property, we can review how the new debt fits with your existing loans through our business loans service.

Bridging Finance, Pre-Settlement Funding and Other Options

Bridging finance can cover a gap between buying new land and selling an existing property, but it usually costs more than a standard loan and has a short time frame. It suits a buyer with a confirmed sale or other repayment source, because a delayed sale can leave you carrying both debts.

Other structures include a revolving line of credit, or a loan secured against property you already own. Using existing property as security can reduce the deposit you need to find in cash, but it puts that property at risk if repayments are missed. Weigh this carefully, and compare more than one lender before choosing.

If you are also planning to build, check whether your lender will release funds in stages and what inspections or valuations it requires at each stage. That detail affects how your builder is paid and how your cash flow runs during construction.

Frequently Asked Questions