Getting a Mortgage on a House With an Annexe

If you need more space to accommodate family members or lodgers, you may be considering buying a property with an annexe or adding one to your home. We look at how to fund the cost of building an annexe on your home, as well as the finance options to buy property with an existing annexe.

What is an annex house?

An annexe is a self-contained living area separate to the rest of the living space. This is often attached to the original property, or on its grounds. This type of property, which is nicknamed a ‘granny flat’, was traditionally used to provide long-term accommodation for elderly relatives.

These days annexes are used more broadly, with popular uses being housing adult children, as well as for home offices, gyms or even as holiday rentals. An annexe is typically considered to be part of the same dwelling, so has the same address as the original property.

Can you get a mortgage for a house with an annexe?

Yes, there are various mortgage options available, depending on how you plan to buy the property and what you’ll be using it for. Each lender has their own criteria, and not all lenders will approve mortgages on all types of annexe or all intended uses.

What if the annexe is self-contained?

An annexe is self-contained in terms of facilities, but cannot have an individual address. If you’re buying a property whereby the annexe has a separate address, it is no longer classed as an annexe and would require its own separate deeds. This means you would be purchasing two distinct properties, even if they share grounds.

What mortgage should you get?

The type of mortgage you need will depend on both the construction type of the annexe, and how you intend to utilise the space. Not all lenders will cover all of the options below, so it’s highly recommended that you speak to a mortgage broker, like ourselves, for advice if you’re looking to finance a property with an annexe.

Here are some options to consider:

Sole residential mortgage - For private occupation and use of the annexe

People who just want a bit more space, perhaps to accommodate their adult children or grandchildren for regular visits, or to use the space as office or leisure space. However, you can also use this option to house relatives as permanent lodgers, assuming lenders are happy that you meet affordability requirements

Joint residential mortgage - To share occupation of property

This is a common choice for those buying with older relatives who would be inhabiting the annexe element of the home. If you’re buying with retired relatives, it’s a good idea to factor in the maximum age limit of the mortgage lenders you approach, however not all lenders have an upper age limit

In this case you’ll need to decide how you will divide the ownership as a joint tenancy or tenancy in common:

Joint tenancy

Where you each have equal ownership in the entire property, including the annexe and the remaining share automatically passes to the other owner if one passes away

Tenants in Common

This is where the split can be any percentage, for example 80/20, depending on their financial contribution, however this can be more complex in the event of a death as each owner can name a beneficiary

Holiday let mortgage

To rent your home to holidaymakers on a short term basis

If you're hoping to rent out the annexe of your property to make a little extra cash on a site like Airbnb, this can be possible with some lenders, although you’ll need to look at holiday let mortgages. Most holiday let mortgage have a maximum and minimum number of days per year that a property must be let out to qualify as this type of property

Buy-to-let mortgage - If you plan to rent out to long term tenants who are not related

It can be more difficult to find a buy-to-let mortgage for an annexe, as long-term lets need a separate address. This would likely require that you apply to separate the deeds to accommodate 2 distinct addresses. Keep in mind that you won’t usually be able to go back and forth between short-term and long-term letting, as lenders usually have strict rules about this and would require remortgaging to a different type of loan to approve such a change

How can you finance a new annexe for your home?

If you’re looking to finance the construction of an annexe on your existing home, a standard mortgage won’t usually be the right option for you. However, there are multiple funding options available, depending on the construction style and the annexes intended purpose.

Here are some finance options they may be suitable:

• Self-build mortgage - This is usually more suited to those building an entire residential property to include an annexe, rather than just the annexe, but some lenders may approve one for the purpose of solely an annexe

• Remortgage to release equity - This is usually the most suitable for those with substantial equity in their home, although not all lenders will approve a remortgage for this purpose. We can help you to find those lenders most open to it

• Bridging Loan - This type of finance is a potential fallback for those not qualifying through the other options, or if you’re building an annexe to rent out. However, keep in mind that this is short-term finance so you’ll need an approved repayment vehicle, such as remortgaging once the build is complete

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What are the typical mortgage requirements?

Mortgage requirements vary by product, so it will depend whether you are buying a brand new home with an annexe or planning to build one. Generally, however, lenders will be concerned with the following factors when assessing your application:

Purpose: What the annexe will be used for is going to be a prime concern, as not all lenders will approve mortgages for all annexe uses. Also keep in mind that you’ll likely need to prove that you’ve planned to accommodate the relevant tenant, whether that be disabled relatives, holidaymakers or long-term renters

1. Construction type: Many annexes will be constructed from non-standard materials and not all lenders approve non-standard construction mortgages, so this will be an important factor
2. Deposit availability: The deposit requirement could vary widely in this type of application, but could be as high as 40% if lenders consider it to be high risk
3. Planning Permission: Depending on the intended use, you may need to apply for planning permission, even for an existing annexe. Lenders will want to confirm this is viable before approving the mortgage

What lenders offer these mortgages?

There are lenders available for all of the potential scenarios mentioned above, but finding them can be the challenging part. Use our rates table to get an idea of what lenders may be available to you, and click on ‘enquire now’ to learn more.

How can I learn more?

Our advisors have helped many people to get a mortgage on a property with an annexe.

Our advisors have access to deals not available to the general public, including those with specialist lenders. We can guide you through the process without any hassle. Getting started is easy, complete our simple online form, and one of our advisors will be in touch.

As a whole of market brokers, we have access to deals that are not available to the general public, including those with specialist lenders who will likely be needed for many annexe mortgages. At Money Helpdesk our knowledgeable brokers can guide you through the entire process, from reviewing your building plans, to recommending the right type of finance and finding you a suitable lender.

Can you use your annexe for business purposes?

Annexes can’t generally be used for business purposes where clients would attend the property, such as retail or health treatment facilities, however, some lenders may consider this where the proper permits are in place.

However, using an annexe as a home office space or creative studio won’t usually be a problem, no matter whether you’re buying a property with an existing annexe, or adding one to your home.

Speak to a mortgage broker who specialises in complex property types

Every property is unique, and certain types of properties require more attention during the mortgage application process. This often means approaching a more flexible lender and getting a skilled broker to assist you in getting the best deal.

Our brokers have plenty of experience securing mortgages on all property types, from standard residential builds to more unusual or complex buildings needing expert support and an introduction to the right specialist lender.

Here are just some of the reasons people all over the UK choose us for their mortgage needs covering all property types:

• Our brokers specialise in complex and non-standard properties

• We can introduce you to flexible lenders with excellent rates

• Your first chat is free with no obligation to proceed

• We have a 5-star rating on leading review sites

Ready to take advantage of a free, no-obligation chat with a broker who specialises in different property types? Get started here.