A granny flat can be the answer for first-home buyers

WORDS LUKE TALBOT

Granny flats are becoming a more and more popular way for first home buyers to share the soaring cost of a first home with parents and, at the same time, provide ongoing independent living for older family members. And for a grandparent to enjoy the closeness of grandchildren when they come along. It’s also a solution for multi-generational living where children are staying at home longer than ever (or returning home just when you thought you were empty-nesters ready to set off into the great unknown as grey nomads).

A granny flat can also be a great way to build equity and even provide a recurring investment income.

If you are considering a granny flat as an option, there are two common ways to arrange the money you need: accessing the equity in your property or taking out a construction loan.

USING EQUITY

The simplest way to secure funds for your new granny flat is to use the equity in your current home. It’s relatively easy to arrange a home loan to build a granny flat if you have enough equity in your existing property and you have sufficient income to support the new loan.

USING A CONSTRUCTION LOAN

If you don’t have enough equity in your property, another option is to take out a construction loan. These are usually approved against the value of the existing property plus the value of the granny flat build contract.

You should be aware that the lender may want to control the progress payments to the builder and also undertake their own inspections throughout the process.

The first step, though, is to check with the council to make sure you are working within permitted parameters and regulations, including the rules around using a granny flat as an investment.

coastfin.com.au