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I already own a block of land with a mortgage on it. Should I sell it and use the money as my next deposit, or keep it and put less down?

Bayley Clarke · Mortgage broker on the road · Last checked 11 November 2026 · 3 min read

The 90 second version, filmed from the driver's seat. The rest of this page is the detail underneath it.

When keeping the land works

The cleanest version is when a family guarantor is in the picture. Their property security covers the deposit on your next place, so you don't have to free up cash from the land, and you keep the block for whenever you're ready to build. The catch is that the land loan doesn't disappear. The bank counts that repayment when it works out what you can afford, so the numbers have to carry both loans comfortably, not just squeeze through.

If they do, and you genuinely plan to build on the block one day, holding it can make sense. You keep the asset, you keep your options and you haven't sold something you'll want later.

When the trade-offs start to bite

Without a guarantor, putting less down usually means borrowing above 80% of the value and paying lenders mortgage insurance. Sometimes that's a fair price to get in sooner, and sometimes it adds up to more than people expect. On top of that, owning land can change how first home buyer concessions and schemes treat you depending on your state and the scheme, so you may be paying stamp duty you were counting on avoiding, and that eats into your deposit too.

So you can end up in a spot where you need a heavy deposit regardless. That's the point where selling the land and putting the proceeds down can leave you with a smaller loan, no mortgage insurance and one repayment instead of two. It's worth running both versions side by side before you decide.

The block you're never going to build on

Here's the question I'd ask yourself honestly. If that land is just sitting there and you've got no real plan to build, you're paying a mortgage on it every month. With no rental income coming off vacant land, the interest generally isn't something you can claim against your tax either, so it's money going out with nothing coming back except whatever the land does in value.

If that's you, what are you doing holding onto it? Sometimes the best move for the next place is to sell the block, take the cash and put it to work where you actually want to live. Check the tax side with your accountant, but don't hang onto land out of habit.