May 29, 2014
Granny flats offer property owners an affordable and practical housing solution for their family, helping to alleviate some of Australia’s housing undersupply concerns. If you would like to look at finance options contact me today on 0413 245 556 or complete our online form to discuss.
Alex Mitchell from Backyard Granny's gives us a bit of insite into this affordable solution and from the finance side of things I'm seeing an increasing demand from baby boomer parents keen to add onto the family home to accommodate grandparents, young adult children or older adult children who have moved back to save for their own home.
Similarly, local investors are interested in the idea of earning a rental income from their property while still living in it. A granny flat is an attractive solution.
To fast track the approval process for granny flats, the NSW government announced in 2009 the State Environmental Planning Policy (SEPP) for Affordable Rental Housing.
The SEPP claims to help families in NSW by:
- Allowing granny flats to be approved as a complying development in ten days,
- Allowing granny flats to be built in all residential zones, and
- Setting clear standards for the construction of granny flats.
Government Fact Sheet Links
- Supporting secondary dwellings (granny flats)
- Supporting Affordable Rental Housing – Granny Flats (Secondary Dwellings)
However, the property owner must meet strict provisions relating to aspects such as the building height and boundary setbacks, floor space ratios and the development provisions. The flat must also meet the conditions of the Building Code of Australia.
Policies vary in each state. To find out more about them a good place to start is the website of the department of planning in the relevant state or a town planner at the local council.
Borrowers must also take into consideration lenders’ finance approval criteria. Since purchasing their home the owner may have defaulted on a credit card payment, phone bill or a personal car loan and this may seriously limit their ability to gain further finance.
There are a number of finance options available:
- Refinancing to a different lender and loan product may help you increase your original home loan amount to include the cost of constructing the granny flat. You are looking for a loan that is more suited to your current situation rather than where you were upon purchasing the home. Be aware there are often fees involved in refinancing.
- Accessing equity Borrowing against the equity in your home may help you finance the granny flat extension. How much you can borrow is subject to lenders’ serviceability criteria and the amount of equity built up. Keep in mind that if you borrow more than 80% of the property value you will be required to pay lenders mortgage insurance (LMI) and this can be quite costly.
- Construction loan If a granny flat is going to cost a considerable amount of money, take an extended amount of time and the borrower doesn’t have enough equity built up in their existing property, they may consider a separate construction loan. When deciding whether to approve the loan, the lender will often consider the value of the existing home plus the value of the proposed granny flat.
For further granny flat information contact Alex Mitchell on 02 4947 2800 or click here to access our website
For further finance information contact Richard Windeyer on 1800 01 LOAN or click here to "Book a Meeting"