Mortgage For House With An Annexe
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Mortgage For House With An Annexe
Sam Bull explains how mortgages work for a house with an annexe.
What is a granny annexe and can you get a mortgage on a house with an annexe?
A granny annexe is a building separate from the main house, used to accommodate an elderly relative. The annexe would usually have its own self-contained living space such as a bedroom, a bathroom and a kitchen.
You can certainly get a mortgage on a house with an annexe, although the mortgage lender will want to know the intended use of the annexe. If it’s for an elderly relative or for your friends to stay, that’ll usually come within standard mortgage criteria.
But if your intention was to rent out the annexe it might be a slightly different mortgage that we look at.
How do mortgages for annexed properties work?
It’s really like any other mortgage application. The lender would instruct a valuer who would recommend the property hopefully as suitable for mortgage purposes.
The main thing would be to understand upfront the intended use of the annexe. Apart from that, it’s just like any other mortgage application that we submit.
Are there any specific requirements for this property type? What type of mortgage will I need?
It depends whether you’re buying the property to live in and if the annexe will be used for your own personal or family use. If a dependent relative will live there, or if it’s to be used occasionally by family or friends, that will fit most mortgage lenders’ standard criteria. It’s also simplest if the property is classed as standard construction.It’s slightly different if your intention would be to live in the main property and let out the annexe. We would need to check the type of tenancy agreement that you were planning on using before recommending a suitable lender.
Most lenders prefer the tenancy agreement to be on a short term basis or holiday let, but certain lenders will allow a long-term tenancy agreement as well.
Is building an annexe a good investment? How much value does an annexe add to your home?
We don’t tend to give out investment advice, but generally speaking building an annexe can add up to 30% to the value of your property – and potentially more. It will depend on the size of the building and the construction type, i.e., whether it’s brick-built or a wooden construction.
A lot will depend on what you build, but generally it will add a good amount to the property value.
Can I build a self-contained flat or annexe in my garden?
Yes, absolutely, if you have the money and the space. You’ll just need to make sure that you get the necessary planning permissions from your local authority.
Is it difficult to get a mortgage on a property with an annexe?
No, it’s usually quite straightforward as lenders will class these types of properties as standard construction. As always it will come down to an acceptable valuation, but generally it’s fine.
How can I fund a new annexe for my home?
We can review your mortgage to see if there’s room for any additional borrowing with your current mortgage lender, on top of your main mortgage. It will depend on the level of income you have and the current property value. We’ll see if there’s any equity there to release.
Most mortgage lenders have certain loan to value limits for additional borrowing, so we would need to consider that. If your current mortgage lender will not allow any additional borrowing, there are other options we can look at.
It could be a remortgage to a different lender, with criteria that allow you to borrow more. If that option doesn’t work, we can look at doing a second charge mortgage to fund the build.
This would essentially be a second mortgage against your home, and a second monthly direct debit. With second charges there are different criteria to meet – and sometimes a second charge mortgage lender will lend you more than you would get on a standard mortgage.
What deposit do I need to mortgage a property with an annexe?
Most lenders assess properties with an annexe as standard, so the normal deposit requirement would apply. Most lenders will need applicants to have a minimum deposit of 5% of the property value.
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Everyone’s different. You might be self-employed. You might have some credit history issues – whatever your situation, we will find the most suitable product available to you from across the whole market.
Do you pay extra stamp duty on an annexe?
Not usually, but if you’re buying a property which counts as two dwellings, then you would be liable for an extra 3% stamp duty. With stamp duty you would rely on the advice of your solicitor – they will advise you exactly how much stamp duty you’ll be paying on your purchase.
What if you want to rent out your annexe? How does that work?
If you want to rent out your annexe, mortgage lenders will need to know your plans upfront. Not all mortgage lenders will allow a residential mortgage in this scenario, so we would need to check.
We would ask whether you’re going to be doing a long-term let or a short-term holiday let. Depending on your intentions, we’d make the necessary enquiries and make the appropriate mortgage recommendation. We’ll just need to make sure we find the right lender for your circumstances.
Does an annexe count as a separate dwelling?
Most annexes are usually built on the same plot of land as the main family home, and therefore the annexe doesn’t usually count as a separate dwelling.
How many bedrooms can a granny annexe have?
There’s no limit. You can have as many bedrooms as you want, depending on the size of your garden and your budget. Most granny annexes have either one or two bedrooms, but there’s no formal limit.
Can I use my annexe as a holiday let?
Yes, you can let the annexe as a holiday let with certain mortgage lenders – but not all of them. If this was going to be a possibility upfront, we would just make sure that any lender that we recommend would allow this.
Can I get a second mortgage on a property with an annexe?
Most annexes are usually located in the garden of the main building, so they aren’t usually classed as a second home. The annexe is usually on the same title as the main building, which means you wouldn’t be able to get a second mortgage on the annexe.
Why might it be difficult to get mortgages for properties with annexes?
It’s not usually difficult to get mortgages for properties with annexes. As long as we carry out all the upfront due diligence and check the usage of the annexe, we can usually secure a high street mortgage with a competitive interest rate.
Can I get an annexe mortgage with a bad credit score?
Yes, in many situations you can. We will request a copy of your credit report and depending on how recent and how severe the bad credit was, we’ll be able to make an appropriate mortgage recommendation. It may be that you need a mortgage lender that focuses on applicants with credit history issues.
Can I get a mortgage for an annexed property as a single applicant?
Yes, it will just be a normal mortgage application. As long as your mortgage is affordable in your sole name, being a single applicant will not affect your application to purchase a property with an annexe.
How can a mortgage broker help you get approved for a mortgage on a property with an annexe?
I’d always recommend speaking with an approved mortgage broker. We’ll be able to recommend the most suitable mortgage for a property with an annexe.
We take into account your personal circumstances, your income, your credit history and your anticipated usage of the annexe to make sure you get your mortgage application approved.
Your property may be repossessed if you do not keep up with your mortgage repayments.
The Financial Conduct Authority does not regulate most Buy to Let Mortgages.
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