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Mortgage for Property with Annex

How to get a mortgage for a property with an annexe.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: May 30, 2022

Many people come to us for advice about getting a mortgage on a property with an annexe after choosing to live with older relatives.

The cost and ownership of the property is also a topic that many homeowners have questions about, as well as how much deposit may be required.

The good news is that the advisors we work with handle mortgages for annexe properties regularly and will be able to provide you with the advice you need to move forward.

Can I get a mortgage for a property with a granny annexe?

Yes. With over 30,000 granny annexes in England in Wales alone, finding a property with additional space for an older family member is not often the problem for many buyers.

When deciding to move into a property with a relative, it’s important to establish beforehand, who will buy the property and who will own it.

More often, both parties contribute funds for the new property but how you share ownership of the property has financial and legal implications.

What is a granny annexe?

An annexe or a ‘granny annexe’ as it is commonly referred to, is a building that is added either onto a property or in the garden of a property.

Many families opt for a property with an annexe as they want to care for their elderly parents or relatives. It can also be more cost-efficient than providing care either in a separate home or paying for a residential care home.

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Buying an annexe property with a relative

Some buyers wish to purchase the property alongside their parents or relatives so that both parties are on the mortgage.

This is referred to as a joint tenancy agreement. The property is owned in equal shares and if one ‘tenant’ dies, their share is automatically divided equally between the other owners.

To find out more about this type of agreement and how it works, see our Joint Tenants vs Tenants in Common Mortgages guide.

Buy with a retired relative

Some lenders can be reluctant to give mortgages to people past retirement age as their income is often lower.

As well as this, some older borrowers may not live past the term of a mortgage, meaning the surviving party who potentially inherits their shares, will need to be able to afford the mortgage for the whole property.

However, there are some lenders that will consider older borrowers and there are also a handful of lenders that have no maximum age limit for mortgage applicants.

Make an enquiry and we’ll refer you to one of the experts for the right advice.

Tenants in common

Another option is to own the property as tenants in common.

This would mean that both you and your relative would each own a fixed share of the property.

The shares do not have to be equal, for example, a property worth £200,000 could be split 60/40, meaning you would contribute £120,000 whilst the other party contribute £80,000.

If one of you passes away, your share will be inherited by the named beneficiary. This could be the surviving party or another person who doesn’t currently live in the property.

This is something to be carefully considered as the person who inherits the share may not be someone you would necessarily like to live with or they may even want to sell their share in the future.

Buying a property with an annexe alone

This is known as a sole mortgage and would mean that the property, including the annexe would be legally owned by the person on the mortgage and property deeds.

Some lenders may have concerns about borrowers who want a mortgage on their own because of affordability issues, especially when a relative will be living on the property as they will be seen as a dependant.

For example, a daughter wants to get a sole name mortgage for a property with an annexe so that her mother can live with her.

The property is worth £200,000 and she plans to pay for this through a sole mortgage. Therefore her mother would not be contributing towards the mortgage or other costs.

For some lenders, this can be risky and they may want to ‘stress test’ the finances of the daughter to ensure that she can keep up with mortgage payments, bills, living costs and any other costs associated with caring for a dependant living in the property.

How much deposit will you need for an annexe mortgage?

Typically, a residential mortgage lender will ask for anywhere between 5-40% of the property’s market value depending on your circumstances.

The biggest mortgages you can get are usually 95%, although there are a handful of lenders who provide 100% mortgages, in some cases.

A 95% mortgages would mean that you need a deposit of 5% of the cost of the house you’re buying.

For example, if the property is worth £200,000, you would need a 5% mortgage of £10,000.

However, every lender is different and the amount of your deposit will vary depending on:

As well as this, some lenders provide lower interest rates, (and therefore lower monthly repayments) for borrowers with a larger deposit.

That being said, the key to truly understanding how much deposit you’ll need, is to get the advice that takes your unique situation into consideration.

Talk to an advisor to find out more.

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Should I seek professional advice if I’m buying a property?

A qualified broker will have experience with finding mortgages for houses with granny annexes and will be able to point you in the right direction of lenders who will be more likely to approve you.

We only work with brokers who have knowledge about the current market and rates, as well as a proven track record of negotiating with lenders and finding the best mortgages.

As well as this, the advisors we work with can handle and paperwork for you, ensuring that your mortgage process goes as smoothly as possible.

Speak to an expert about getting a mortgage for a house with granny annex

If you have questions about getting a mortgage for a property with an annexe,  or want to speak to an expert for the right advice, call Online Mortgage Advisor today on 0808 189 2301 or make an enquiry here.

Then sit back and let us do all the hard work in finding the broker with the right expertise for your circumstances. We don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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Pete Mugleston

Mortgage Advisor, MD

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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