Mortgage Lending on Homes with Annexes
Properties with an annexe have a unique opportunity when it comes to Stamp Duty - but what does it mean for your mortgage? Unpick the details about how a mortgage lender will consider an annexe during your property loan assessment.
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Based on your yearly income,
you may be able to borrow
Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.
Depending on your personal circumstances, some lenders may let you borrow 5 times your salary.
Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.
Mortgage Lending on Homes with Annexes
Lots of people in the UK look for a property with an annexe. This can be an excellent way to set aside a space to work from home, as a private workshop, or as living accommodation for an elderly relative.
However, we also receive many enquiries about mortgaging a property with an annexe - often from homebuyers worried about the additional costs, or whether they will qualify for the mortgage they need.
In this guide, we'll summarise how financing a property with an annexe works, and all the crucial factors a lender will consider.
For more support with finding the most competitive mortgage deals available, give the Revolution Brokers team a call on 0330 304 3040, or email us at [email protected].
What is Considered an Annexe in Mortgaging?
Much of the time, you might see a property advertised with a 'granny annexe'. This refers to the popular set up of buying a home with separate accommodation for an older family member to live in.
This arrangement means that a parent or grandparent has a family on hand to look out for them, but that they also have their own private space.
In most cases, it is more affordable to purchase a property with an annexe than consider residential supported living or a care home.
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Is it Difficult to Get a Mortgage on a Property with an Annexe?
It shouldn't be any more complicated than any other type of mortgage, provided you meet the affordability criteria. There are tens of thousands of properties in the UK with annexes, so it is a reasonably common structure.
The considerations to bear in mind include:
- Ownership of the property - which relative or member of the family owns which part of the property, is responsible for the mortgage, and is named on the deeds?
- How will you share the financial contributions for the mortgage and general upkeep of the property?
- Will you have a joint tenancy agreement to set out how the ownership is divided equally between owners?
- If you have an elderly relative living with you, will you automatically inherit their share of the property if they pass away?
Another typical scenario is where a parent or grandparent lives with their family in a separate part of the property when they are past retirement age.
While there are later-life mortgages available, it can be challenging to get a loan past retirement, or it might not be possible to get a mortgage for the value of the required property.
There are many ways to structure a tenancy agreement and mortgage terms around having two or more owners and parties to the mortgage agreement.
A tenancy in common is an agreement that sets out your ownership - that doesn't have to be 50/50 and can be divided any way you wish. You then name a beneficiary who will inherit your share of the property should you pass away.
If those beneficiaries are not the other respective owners, it is essential to decide what will happen, as you could be in a position where a partial owner wants to sell their share.
Can I Get a Mortgage for an Annexed Property as a Single Applicant?
You can indeed; a sole mortgage means that one person is responsible for the repayments, and owns the property independently.
The biggest obstacle to finding this type of mortgage is proving affordability since your lender will need to see that you can keep up with the mortgage repayments on a single income.
If you buy a property with an annexe and have a relative with you, they will be classed as your dependent.
What Deposit Do I Need to Mortgage a Property with an Annexe?
In most cases, you will need from as little as 5% up to 40% of the property's value as a deposit. This depends heavily on your circumstances, finances, and the value of the home.
The highest Loan to Value ratio available is usually 95%. However, there are some 100% mortgages, although there are specific criteria you have to meet to qualify.
Deposit requirements depend on:
- Credit scoring and credit history.
- Your age.
- What the property is worth.
- Whether it is of standard or non-standard construction.
In some cases, if you present a higher risk, you will need a higher deposit or will be offered more expensive interest rates.
Expert Support with Mortgaging an Annexed Property
The best option to find a competitive mortgage for a property with an annexe is to contact an independent, experienced broker who can assess your circumstances and the amount you wish to borrow to direct your application to the most suitable lenders.
Contact business finance broker for access to the whole of the market, and professional assistance with your mortgage application.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.