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Property annex mortgage

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Get a mortgage on a property with a granny flat or annexe

An annexe is a cost-effective way to increase your home’s space or provide long-term housing for elderly relatives without moving property.

This article will discuss what an annex is, how it can be funded, and how you can find the right finance for your specific needs.

Click the link below to speak with our mortgage brokers, who will provide mortgage advice. We will then introduce you to the mortgage lenders to suit you.

No matter your credit history, we have specialist lenders to help you with a residential mortgage. We can discuss how much deposit you will need and the mortgage repayments.

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Can you get a mortgage for a house that has an annexe?

Yes, you can get a mortgage lender if your annex is attached to a house. However, each mortgage lenders have its criteria, depending on the purpose of the annexe and your personal circumstances.

The situation for those who want to add an annexe to their existing house will be slightly different. While you might need financing, it won’t necessarily be with a mortgage. Later in this article, we’ll discuss the other financing options.

What is an annex exactly?

An annexe is an additional space to a property still considered part of the same dwelling. It is often referred to as a “granny flat” or “granny annexe”, because it provides additional space to a property.

While an annexe can be used as a granny apartment, it is still quite common to use. However, they can also be used for other purposes, such as home offices, gyms, or holiday rentals.

An annexe is not required to be attached to the property like an extension. It can often be located in a purpose-built or converted ancillary structure.

The annexe is independent but cannot be attached to the main property. However, the deeds will still consider the property a single dwelling. You may need to seek planning permission but your mortgage broker can advise.

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Are there any particular requirements for this type of property?

It will all depend on the intended usage of the annexe and the type of construction and facilities it contains.

If you are looking to purchase a property that has an annexe, here are some things to think about:

Types of Construction

There are many options for materials that could have been used in construction. These include timber brick or even glass. Therefore, lenders might consider an annex non-standard. This type of property is often only available to specialist lenders.

Annexes: Purpose

It is also essential to assess whether the purpose and function of the annexe are compatible with your needs. If the annexe will be used by older relatives at retirement age, it is essential to have wider doors, non-slip flooring, and step-free access.

You can use it for a vacation, but you could also let. High-end luxury finishes are usually the best way to make the most of your property. If you are aiming to make a profit, it is advisable to review the deeds of your property before you purchase.

You should also consider the following:

Planning Permission

You may be able to add an extension to your home or an annexe under permitted development rights. You will need planning permission if the annexe is an independent, self-contained structure. Before any work can begin, you should obtain a certificate from the local authority.

Deed restrictions

It is a good idea to check your property deeds to see if there are any restrictions or covenants you could be violating by adding an annex. You may need neighbours’ consent, for example. You will likely also require authorisation from the landowner if your property is leasehold.

Annexe type

There are many materials you can use for your build. However, matching the annexe to the property could increase its value if you decide to sell. For convenience, you can also buy prefabricated materials and complete flatpack buildings.

You might consider adding an annexe to your home to make it more accessible for older relatives or grown-up children to avoid the main house. It is possible to buy a mobile home-style annexe that can be moved by road.

This type of annexe is not required to be approved under the Caravan Act. However, it’s highly recommended that you obtain a certificate of lawfulness. This is where your conveyancer can best assist you.

How can a broker help get you approved for a mortgage on a property that has an annexe

Finding the right finance can be difficult, whether you are looking to buy a home with an annexe or to add one to your existing home. An experienced broker will guide you through the process, from reviewing your plans to finding the right lender and recommending the best type of finance.

Our brokers know which lenders will accept properties with an annexe and what criteria they must meet.

They can tailor their advice to your needs, regardless of whether you are looking to rent out the property for a longer term or need to find out how much each lender need from borrowers.

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Finance an annexe

The type of financing you need to finance a property with an annexe depends on whether you are looking to purchase an existing property or build additional space for the main property. A mortgage might not be the best form of financing in some cases. It depends on many factors.

Many annexes still serve the purpose of housing elderly parents and their children, enabling them to provide better care. It is easier to do this if both parties have an existing house to sell. The proceeds could go a long way towards or entirely fund the purchase of a new home.

Buyers often have a joint tenancy for their parents to get additional financing if they need it.

You could use mortgages to finance purchasing a home with an annexe.

  • A joint mortgage is available to 3-4 borrowers. Some lenders allow 3-4 borrowers to be named in deeds. However, only the highest-income borrowers will be considered. Some lenders will consider all four borrowers. You will need to consider the legal implications of sharing the ownership of the Annexe with relatives. They’ll need you to decide whether they are a joint tenant (they would have equal shares of property) or a tenant in common (property can be owned jointly but not equal shares). There are various options available regarding how ownership will be divided in the event of a joint owner’s death. This is where your conveyancer can help you. However, it may be harder to find a lender for applicants who are older than 65. But some lenders will accept older applicants.
  • Standard residential mortgage – This is a good option if you intend to purchase the whole property and only allow relatives to stay as guests. This option, if affordable, should offer the most flexible division of finance and ownership.

Finance the addition of an annexe to your home

Whether you are building from scratch or purchasing a pre-made unit doesn’t matter. This will affect your financial options and personal circumstances.

There are many options to consider:

  • Self-build mortgage While it is possible to obtain this type of mortgage to finance specific annex projects (though not all lenders will fund whole dwellings), an annexe is considered a part of the property. It would make it vulnerable to unauthorised tenant occupancy, making repossession difficult if necessary.
  • Remortgage to Release Equity – This option is popular for people who own their homes or have significant equity.
    Some lenders may not be keen to lend money as an annexe would decrease the property’s potential resale price. However, this property is in high demand today, and many lenders would be willing to remortgage it.
  • Bridging loan – A bridging loan is a way to get funds fast if you are unable or unwilling to build your own home. Bridging lenders can usually be more flexible in what the funds are used for. If equity or cash deposits are not possible, they may accept other assets.

What kind of mortgage are you required to rent your annexe?

There will be fewer lenders available if the annexe is being let as a separate residence. A person renting an attachment to you will be considered a lodger rather than a tenant.

Therefore, you must ensure that you have the proper planning permission to rent a space. Airbnb mortgages may have different terms than a standard buy-to-let. It is essential to explain your plans for renting the property.

Lenders that offer buy-to-let mortgages are available. However, it is essential to inform them of your intention to release the annexe at the beginning. They often have particular criteria.

  • Some lenders do not permit Airbnb lettings
  • Some lenders won’t allow holiday letting
  • Others do not allow long-term tenancies, but only holiday lets
  • The lender may require that the buyer occupy a minimum of 40% to 60% of the home.

You should also know that the Annexe cannot be sold as separate property. It will share the same address and deeds as the primary residence.

Match you with a broker that specialises in annexe mortgages

An annexe is a great way to house your dependents without compromising privacy or space, your home office’s needs or a way to make extra income.

It can be complicated to get financing for this type of project; Click the link below; we will provide all the information you need to begin your journey and find the best lender.

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What value can an annex bring to your home?

An annex may limit your potential buyers. However, it could increase the value of your property by 20-30% for the right audience.

Many potential buyers are attracted to the possibility of MDR (Multiple Dwelling Relieve) in addition to the extra space.

This is a way to reduce stamp duty if relatives only use the annexe.

The annexe shares the primary address so relatives can get a 50% reduction in council tax.

Is an annexe considered a separate dwelling?

An annex can’t be considered a separate dwelling and may only be used to occupy one household.

If you sell the property to make a profit, it cannot be considered an annexe, so applying for a change in use is vital if you don’t intend to use the annexe as a separate dwelling.

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