Getting a Mortgage on a Property With an Annex

An annexe can be an efficient way to add extra space to your home or provide long-term accommodation for elderly relatives without going through the expense and upheaval of moving to a larger property.

In this article, we’ll examine what defines an annexe, the different ways to fund one, and how to find the right type of finance for your needs.

Can you get a mortgage on a house with an annex?

Yes, if you’re looking to purchase a house with an annex attached, there are mortgage lenders who will be happy to help. Each lender has its own very specific criteria, so it will depend on what you intend to use the annexe for and your circumstances.

If you want to build an annexe on your existing home, the situation will be slightly different. While you may well need to find financing for the project, this won’t necessarily be with a mortgage. We’ll look into the various finance options later in the article.

What exactly is an annex?

An annexe, sometimes called a ‘granny flat’ or ‘granny annexe’ due to its traditional purpose of housing elderly relatives, is additional space added to a property still classed as part of the same dwelling. Whilst using an annexe as a granny flat is still very common today, there is a wide range of other uses, such as home offices, gyms, and, more recently, holiday lets.

Unlike an extension, an annexe does not need to be attached to the main property and is often in a purpose-built or converted ancillary building. It is self-contained but cannot have an individual address, and the deeds will still class the property as a single dwelling.

Are there any specific requirements for this property type?

This will depend on the annex’s intended use, as well as the construction type and facilities contained within it.

Those looking to buy a property with an annex will need to consider:

Construction type

There are several options in terms of materials that may have been used for construction, such as timber, brick, or even glass, and therefore, lenders may consider an annexe to be non-standard construction. Often, only specialist lenders will accommodate this type of property.

Purpose of annexe

You might also want to consider whether the annexe’s purpose matches your needs. For example, if it’s going to be used by older relatives, wider doorways, step-free access, and non-slip flooring are important.

If you plan to use it as a holiday let, the greatest profits are typically achieved with a high-end luxury finish. It’s also a good idea to check the property deeds before you buy if this is your goal, as restrictive caveats sometimes ban any commercial activity.

If you’re looking to add an annexe to your existing property, you’ll also need to consider:

Planning Permission

It may be possible to add an extension or annex to your home under permitted development rights. If the annex is a completely separate self-contained building, however, it’s more likely that you’ll need to seek planning permission. In either case, a certificate of lawfulness should be obtained from the local authority before works begin.

Deed restrictions

It’s a good idea to check your property deeds for any restrictive caveats or covenants that you may fall foul of by building an annex. For example, there may be a need to obtain consent from neighbours. If your property is leasehold, you will also likely need authorisation from the landowner.

Annex type

You can use all sorts of materials for your build, including eco friendly options, however, matching the annex to the property may maximise property value if you ever decided to sell up. Buying prefabricated materials or complete flatpack buildings is also possible for convenience.

If you’re adding an annexe to provide the necessary space for elderly relatives or even grown-up children, there’s a chance that you might want the option to move the annexe with you, should you ever relocate. In this case, it’s possible to purchase a purpose-built mobile home-style annexe, which can be transported by road.

Under the Caravan Act, this type of annex may not require planning permission, however, it’s recommended that a certificate of lawfulness is still sought. Your conveyancer will be best able to advise you on this.

How a broker can help you get approved for a mortgage on a property with an annex

Whether you’re looking to purchase a home with an existing annexe or add an annexe to your home, sourcing suitable finance can be complex. A broker with prior knowledge in this area will be able to guide you through the entire process, from reviewing your building plans, through to recommending the right type of finance and finding you a lender.

The brokers we work with know which lenders will consider properties with an annexe and the criteria you’ll need to meet in each case. This allows them to tailor their advice to you, whether you plan to let out the property on a long term basis, or need to know how much deposit each lender requires from borrowers in your circumstances.

To save yourself the time and stress of attempting to tackle this alone, simply get in touch, and we’ll pair you with an expert broker with specific experience in helping clients fund annexe purchases and build.

Financing an annex

The type of finance you’ll need for a property with an annex will differ depending on whether you’re planning to buy an existing one or build one. In some cases, a mortgage may not be the best type of finance at all; it depends on a number of factors.

A significant number of annexes are still used to house elderly parents with their children to facilitate care provision. This can be much easier to accomplish if both parties have an existing home to sell, as the proceeds may go a long way towards or completely fund the new purchase.

If additional finance is needed, buyers often club with their parents to purchase a home suitable for both of their needs.

Mortgages that you could potentially use to fund the purchase of a home with an annex include:

• A joint mortgage for 3-4 borrowers – Some lenders allow for 3-4 borrowers to be named on the deeds; however, often only the 2 highest incomes will be considered. Some lenders will look at all 3-4, though. The legal implications of sharing ownership of the annex with relatives will need consideration and you’ll need to agree whether they’re classed as a joint tenant (they would own equal shares of the property), or a tenant in common, (property is owned jointly, but shares needn’t be equal). These options also vary in terms of how ownership is divided if any of the joint owners pass away. Your conveyancer will be best able to advise you on this.
  It can be more difficult to find a lender if some of the applicants are beyond retirement age, but certain lenders will consider older borrowers.

• A standard residential mortgage – If you plan to buy and own the entire property and simply accommodate relatives as lodgers, then this could be an ideal option. If affordable, this option should be the easiest in terms of division of financial responsibility and ownership.

Funding the addition of an annexe to your existing home

Whether you’re constructing from scratch or buying a ready-made unit can affect the type of finance suited to your needs and your circumstances.

Options to consider are:

• Self-build mortgage—This type of mortgage is possible for certain annexe projects. However, there are fewer lenders in this niche, as many will only fund entire dwellings. An annexe would only be considered a partial interest in the property, which leaves it vulnerable to unauthorised tenant occupation, which would make repossession very difficult if it ever became necessary.

• Remortgage to release equity – This is a popular option for those who own their home outright or have substantial equity.
  Certain lenders may be reluctant, as historically, putting an annex on your property would reduce the potential resale value. Nowadays, however, there is considerable demand for this type of property, and plenty of lenders offer remortgages for this purpose.

• Bridging Loan – If you cannot qualify for a self-build or don’t have enough equity in your home for a remortgage, then a bridging loan could be the answer – particularly if you need the funds quickly. Bridging lenders are typically more flexible about what the funds can be used for. They may also accept other assets if equity or a cash deposit is not an option.

What type of mortgage do you need to rent out your annex?

If you intend to let out the annexe as a separate self-contained residence, fewer lenders will be available to you than if you’re buying purely for residential purposes. In many cases, a person renting your annexe will be considered a lodger rather than a tenant, so you should obtain the correct planning consent for a rentable space. AirBnB mortgages can have different terms from a standard buy-to-let, so it’s important to explain how you intend to let the property fully.

Some lenders will provide buy-to-let mortgages; however, they must be aware of your intention to let out the annexe from the beginning, as they often have very specific criteria, for example:

• Some lenders will not allow AirBnB lettings specifically
• Some lenders will not allow any form of holiday letting
• Others only allow holiday lets and no longer-term tenancies
• The buyer may be required to occupy a minimum percentage of the home; this ranges from 40% to 60%, depending on the lender.

It’s also important to realize that the annexe cannot be sold off as a separate property, as it will share the address and deeds with the main residence.

Get matched with a broker who specialises in annex mortgages

An annexe can be an excellent solution for housing your dependents without compromising on space or privacy, your home office needs, or even a way to earn extra income. Obtaining the right finance for this type of project can be difficult and complicated, but don’t let that deter you. Let us match you with an expert who can simplify the whole process for you!

To take advantage of our broker matching service, call today on 0330 818 7026 or make an enquiry and we’ll put you in touch with an adviser with a wealth of experience in this niche.