Article published 20 January 2021
A granny flat is generally considered as an independent living area located on the property of your home. It can be detached or attached to your home. When sourcing funds to finance a granny flat there are some options you can look into when getting a loan.
Using equity to finance your granny flat
If you have owned your property for a few years and are looking to expand through a granny flat, it is possible that you have built up enough home equity to finance this build.
Your home equity is the difference between your property’s market value and the balance of your mortgage. Working with your broker, you can calculate the accessible equity you will have in your property and draw down on those funds in order to gain the appropriate finances to build a granny flat.
Find out how to calculate your equity here or speak to your local broker to find the right option for you.
Using Construction Loans
If your property does not have enough equity to finance the build of a granny flat, or you would like to explore other options, a construction loan may be a suitable option for you. A construction loan may involve refinancing your current loan to include the construction loan amount for the build of the granny flat.
A construction loan works differently to a traditional home loan as the funds will be available in stages as progress payments to be made to the builder.