Granny Flat Loans: Everything You Need to Know
2024-07-08
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Building a granny flat in your backyard has never been more worth it.
Whether you're hoping to make a little extra money from Airbnb or boost the overall value of your property, a modern granny flat can suit your needs and situation.
But how do you go about getting a granny flat loan? What are the costs? Is it difficult? At Money Spaces, we want to make your end to end experience as easy and seamless as possible. Read on and learn everything you want to know about financing your granny flat.
Obtaining Finance: How We Can Help
There's no one-size-fits-all solution. We can help you explore options based on your situation:
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Equity availability: Do you have equity in your existing home?
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Refinancing: Consider refinancing your current mortgage to include construction costs.
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Savings: Can you tap into savings to contribute to the project?
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Self-managed super fund: Is this a potential funding source?
We work with dedicated mortgage brokers who specialize in financing granny flats and homes. They have access to a wide range of lenders (over 30 institutions and banks) to find the best fit for your budget.
Granny Flat Finance: Your Options
There are two ways our clients commonly fund their granny flat costs. While our broker will find a solution that ticks your boxes, these options are the most straightforward – take a moment to learn a little bit more about them.
Leveraging Home Equity:
For homeowners who have diligently built equity in their properties, we can explore utilizing that value to finance the granny flat construction. This approach can be particularly advantageous if your property has experienced significant appreciation. For example, if your home's value has increased from $400,000 to $550,000, and you require $150,000 for the project, accessing your home equity may be a viable option. Not only will this finance the granny flat, but it can also further enhance your property's overall value.
Refinancing with Construction Loan:
If your current level of equity is insufficient for a straight equity withdrawal, our brokers can assist you in securing a traditional construction loan. This may necessitate refinancing your existing mortgage to encompass the additional construction loan amount. Refinancing is typically only bypassed if you have already fully paid off your home loan.
As part of the construction loan financing method, you use a payment schedule: This means you only pay for the build according to its stages. There are two design and eight building milestones – upon the completion of each stage, you’ll be invoiced for an amount.
Who is Eligible and How Long Does it Take?
Before signing any contracts, Money Spaces recommends chatting with our broker first. You don't need to be contracted already – we'd much prefer our clients begin their build with a realistic dream in mind. How a lending institution views you will depend on many things, like income, payment history, credit rating, expenses and examples of financial security.
How long does it take to Obtain Granny Flat Finance?
On average, you're looking at around three weeks. The first one or two weeks will be spent gathering the financial details required by the chosen lending option – there is no one size fits all timeline, unfortunately. A single person with one bank account, a traceable history of pay slips and few existing commitments will have a different application than a self-employed business owner with a family trust, a few investment properties and multiple bank accounts.
Once all paperwork has been gathered, verified and submitted, lenders can usually approve a loan within five business days.
Are you excited to take the next step?
Why not make an appointment with our consultants and review your financial situation?
