Granny Annexe Mortgage Advice

Our mortgage advice service for granny annexes and habitable outbuildings

Arranging mortgages on these properties is complex, due to the big variations from lender to lender in what is acceptable. So the assistance of a good independent mortgage broker will help you avoid frustrating and stressful failed applications.

If you want to buy a property with an annexe, our typical advice fee is £299 and is only payable upon a legally binding mortgage offer approval. We are an independent mortgage broker with access to the vast majority of the lenders in the UK.

If you are capital raising to build an annexe, our advice service is usually free of charge, except for self-build mortgages where funds are advanced in stages; see below for more information on self-build.

Can I use a granny annexe for occupation by a family member or friend?

The most widely mortgageable reason for owning an annexe is occupation by your friends or family. If you are buying or remortgaging a property and this is the current, or intended use, then it's unlikely to be problematic.

You might still find considerations like the footprint of the primary property, the lack of an adjoining door, or other policy issues causing some lenders to decline (along with a fair number who will dismiss any annexe). So, you will still benefit from an experienced mortgage advisor to simplify the process, and we can help you with this.

You will likely want to have the occupant sign a “consent to mortgage” deed, which prevents them from gaining a legal interest in the property.

Can I let a granny annexe on Airbnb or as a holiday let?

We can help you arrange a suitable mortgage if you want to buy a property with an annexe to be let a holiday let or Airbnb. If you let the property without the correct mortgage, the property could be repossessed.

Finding a suitable lender is complex, and difficult for someone outside the industry. There are many factors determining which lenders could be suitable.

If you already own a property, it depends on whether your mortgage lender permits this, as many do not. If you find yourself in this situation, we can help you arrange a suitable loan.

You also need to consider aspects like local authority licensing requirements if they exist, appropriate insurance as many standard residential policies may be unsuitable, regulations regarding gas certification and fire health and safety concerns.

Can I let a granny annexe on a long-term tenancy?

Yes, there are a few lenders who can accept this, and we can help you arrange a loan whether for a purchase or re-mortgage.

But there are a relatively limited number of lenders for this so it’s very difficult to self-advise. You will benefit from the assistance of a competent advisor such as us.

Suitability will depend greatly on the size, location and access arrangements for the annexe and whether the property has separate utility meters or council tax.

You will need to avail yourself of all the legal implications and requirements, regarding licensing if applicable, gas, electrical and fire safety, insurance and tax. We do not advise on legal or tax matters, so other assistance may also be relevant.

However letting an annexe may be more favourable than traditional buy-to-let as the legal requirements for “resident landlords” are more favourable to the landlord, potentially with less onerous repossession processes and greater flexibility in the terms of any tenancy agreement. Normal “assured shorthold tenancy” agreements might not be suitable, and care should be taken to use a correct tenancy agreement.

The tax regime is also more generous.

Can I raise capital to build a granny annexe?

If you want to finance the building of a habitable additional space on your property, there is a bewildering array of potentially suitable solutions to raising funds.

If your existing mortgage has an early repayment penalty or is on a competitive rate, a further advance with the current lender or a secured loan may be the best option, with pros and cons for each solution.

For some borrowers, an entirely new remortgage with additional borrowing may be best. We can help you to understand the best cost options and the applicable pitfalls from all the possible solutions.

We can usually arrange a further advance with your existing lender or recommend products from secured loans to an entirely new mortgage. So we can help ensure you get the right solution.

We will also consider whether borrowing against other assets may be more appropriate or even using a personal loan and refinancing the whole property once works are complete to repay the loan.

If your current property has insufficient equity to raise capital for the build, a self-build product may be suitable, which we can also assist with.

Our advice fees differ for self-build mortgages, please see our self-build guide here for further information.

Can income from letting a granny annexe count towards my mortgage?

Yes, potentially. In most cases, this will only be where you already own the property and have a track record of the income. We can help you with this.

There are also a very small number of lenders that might consider this income in a purchase scenario. Due to the small number of lenders, it is very case dependent so contact us for further advice on your scenario.

Many lenders won’t accept this income and those that do will have very different approaches to calculating the income level. So you will likely find it challenging to arrange yourself.

Can I get a mortgage on a granny annexe with separate council tax?

Yes, some lenders can accept properties with separate council tax arrangements for an annexe on the same title deeds.

However, they are few and far between, and those that accept this have very different rules about what the annexe is used for, the size, access arrangements and other aspects of the annexe.

So speaking to a mortgage broker like us would be the best way to try and arrange such a mortgage as the requirements are complex and varied.

Can I get a mortgage on a granny annexe with separate utility meters?

Again, yes this is potentially acceptable but with a small number of lenders; each having their own complex rules about the use of the property, its composition and issues like council tax arrangements.

We can help you arrange a suitable mortgage for properties with separate meters.

Why do some lenders object to lending on granny annexes?

Those lenders that refuse outright to lend on these properties are generally concerned by the prospect of repossessing the property and finding there is a tenant with a long-term letting agreement and a legal right to remain at the property.

That could pose many issues for the lender and further financial losses, which they may never recoup. With 'assured shorthold tenancy agreements' now being suitable for up to three years, there is a real risk they might have to hold a property for years before being able to sell it.

So it's understandable that some lenders outright refuse to consider these properties.

Factors affecting the choice of lenders available & annexe design

If you are considering building an annexe, there are several considerations to ensure your property remains suitable for any future mortgage and to understand how changes may impact saleability.

Firstly, any outbuilding without the ability to be sublet is likely not considered an annexe.

Washing facilities and a second kitchen usually invoke the lender's policies regarding annexes (a summer house with a shower and toilet is not likely to be an issue with most lenders).

The size of the annexe is probably the primary consideration. The closer the size gets to the footprint of the main building, the fewer lenders will consider it.

At the time of writing, there will be limited lenders for annexes with sizes over 50% of the main building. We may still be able to help you though. Most lenders are likely suitable where the footprint is less than 20-25% of the original building.

A linked entrance to the original building is also desirable for many lenders. If building an annexe, consider whether an adjoining door is appropriate.

Many lenders will stipulate that an annexe should not have separate services, i.e. gas, electricity and water meters, or council tax account and address. Again, properties that have these issues are something we can likely help you with.

When building an annexe, you should choose carefully whether to include individual services or separate council tax, as these could significantly impact lender choice when selling the property.

It is also possible though, to simply consolidate separated meters or council tax before selling the property in the future.