Multigenerational living is all the rage these days. Lots of people are keen to join forces with family members in order to benefit from a larger property, and/or moving in an elderly relative can make it easier to look after them as their needs increase. Sometimes, adding a ‘granny annexe’ (other family members welcome!) is the best solution. Of course, an annexe can also be appealing as a potential source of income. But what does it all mean in terms of mortgages?
Well to start with, let’s go back to basics…
What is an annexe?
An annexe is an outbuilding or separate dwelling, which is associated with the main home. Sometimes it is physically joined onto the main property, other times there is a degree of separation. An annexe will usually contain some living accommodation, a small kitchen and a bedroom and bathroom. It offers the occupier a degree of independent living, since they have their own space while still being close by and it can also provide additional accommodation for the main household. This has made annexes a great choice for those wanting to accommodate elderly parents, grown up children or to provide guest accommodation. Some people choose to use their annexe as a holiday let or rent it out on sites like Airbnb to gain some extra income.
Why can it be problematic?
Once an annexe is added, the property may then be considered as mixed-use residential and commercial. A residential mortgage is the standard mortgage that is used for people’s main place of residence, ie on the home that you intend to live in. A commercial or ‘buy-to-let’ mortgage is used for properties that you intend to rent out, either short-term or long-term, to someone else. For example, your house may remain as your main home but the annexe is let out to paying tenants. In cases like this, the two separate uses require different types of mortgages- a residential mortgage AND a commercial or buy-to-let mortgage. To make matters worse, if you apply for a residential mortgage when your intention is to let the property to tenants (or apply for a buy-to-let mortgage if you plan to live there yourself), then you’re at risk of committing mortgage fraud. Eek! All sounds a bit scary.
What is the solution?
Well first you need to be absolutely clear on what you intend to use the annexe for. Will it be guest accommodation for your own home, will a family member be living there permanently (and presumably not paying rent!) or are you planning to rent it out as holiday accommodation or on a long-term let? Once you are clear, you can start looking at your mortgage finance options and, of course, we would advise that you find a reputable mortgage advisor to assist you.
A house with an annexe can be more difficult to obtain as a standard residential mortgage won’t always fit the bill. But it’s not impossible.
If you intend to let any part of the annexe, this may be achievable with certain lenders however, permission must be sought to avoid being in breach of your mortgage terms. It’s all about doing your research and searching the whole market to find the right lender for your needs.
As ever, taking professional advice is a must and Hudson Rose is a highly recommended mortgage brokers with a wealth of experience in dealing with these types of properties. We put customer service above everything so we’re always happy to take as much time as you need to chat through all your options. Give us a call and let’s see if we can find you a solution.
Speak soon! 🤘
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