A guide on buying a house with an annexe

Annexes are part of homes that often offer spacious living quarters and the opportunity for extended family or guests to have their own private space.

In this article, we will be going over all you need to know concerning annexes so you can buy one and have all the information necessary to not make a detrimental mistake.

From how to find the right type of property with an annexe to the advantages and disadvantages of buying a house with an annexe, we cover it all. So, read on if you’re interested in making the right decision.

What does it mean to have a property with an annexe? 

If you have a property with an annexe, it means the house has a self-contained living area attached or separate from the main house.

Properties with an annexe are those that have an additional part of a building that is added to the original building in order for there to be additional grounds. Making it a common way for landlords to add in more space.

Usually, an annexe will have enough living space for someone to live independently for a period of time so will include a bedroom, kitchen, living space and bathroom. However, annexes can also come with just a room.

Not only does an annexe provide added space, but it also presents an opportunity for potential rental income or the ability to accommodate ageing parents or children as they get older.

Annexes are often difficult for landlords because they remain difficult to get a mortgage, so before buying an annexe it is vital to consider the layout and accessibility of the space, as well as any potential zoning or legal limitations. 

But with the right property and consideration, a house with an annexe can be a smart investment for those who are looking to add additional income streams to their portfolio.

Has the demand for properties with annexes gone up?

In recent years, the demand for annexes has gone up because annexes are often used to take care of elderly relatives or as a convenient way to have lodgers. The cost of care has gone up and so has the cost of rent, making annexed properties more valuable.  

As the inflation rate goes up, the more the banks have to raise their base rate and the higher the rate of interest on mortgages. This means it becomes harder for people to profitably buy using a house mortgage so this impacts the sales of houses in general.

However, looking specifically at annexes the demand has in fact gone up with those looking to buy an annexe on Rightmove going up by 89% in January 2021 compared to the previous year.

This is perhaps because of the increase in demand for people looking to have their own offices in their houses which are separate from the main building.

After the pandemic in 2020, having your own working space from home became a lot more important, especially as a lot of workplaces transitioned to fully remote or hybrid working.

Should you buy or build an annexe?

Whether you should buy or build an annexe depends on whether it is profitable with the money invested. This includes the relative cost involved relative to the value added to the property.

If buying a house with an annexe, you have to consider costs like stamp duty and if the building has costs like planning permission. 

This will vary based on your individual situation so consider your options carefully. However, a secondary factor is the inflation rate at the time which is dependent on the general rules for buying a house.

Consider all of these factors and perhaps speak to professionals with expertise in these specific areas such as estate agents, property developers and even landlords.

Also, make sure you do your due diligence and perhaps look over a property viewing checklist when buying to help determine if the property is a good price for what the seller is asking.

How can you find the right property with an annexe that meets your needs?

In order to find the right property that meets your needs, it may be useful to consider the property’s location, your budget, the spacial requirements of the annexe or the accessibility of the annexe.

If you don’t make sure the property meets your needs, you could end up disappointed or having to comply with rules and regulations you aren’t aware of surrounding planning permission.

Annexes when considered correctly can be an excellent addition to a house and an investment on your property but if you’re not sure how to decide on buying a house with annexe, it could prove costly.

What location should you have for your annexe?

Location for an annexe is likely going to be in an area where there are already a lot of annexed houses if you are buying. Once you have found the right area, consider where the annexe is in relation to neighbouring buildings or main roads. 

Other than this, location is a variable that will impact the purchase of a property by quite a bit because of the different planning permission rules that surround the UK.

You can check out what the planning permission laws are like for the location you want to purchase by visiting the government website here and searching for your local council to contact.

It could be the case that you encounter problems in the planning process like encountering a property that is in a conservation area or in a green belt. However, there is usually a way around gaining approval for construction.

What kind of budget should you have for an annexe?

It is estimated that annexes cost around £100,000 to build based on the average size.

As you purchase a property, consider if you have the budget to annex a new area of the house onto the existing building. 

With all of the construction costs included, it could be the case that the annexe costs upwards of this figure, especially if you are using additional materials and go for a larger build.

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What are the spatial requirements of the annexe?

Because an annexe should be an additional area of a property that isn’t as big as the main property, the annexe shouldn’t exceed more than 50% of the property’s border. This includes outdoor houses that are already in the premises.

As well as this, if you’re looking to construct an annexe perhaps with multiple floors, it will be hard to gain approval for planning permission here as there are rules around having a certain amount of natural light.

New annexes should consider the surrounding area and the impact this has on the existing property and neighbouring properties.

How accessible will the annexe be?

To consider what the accessibility to other amenities are like in the area, you’ll need to first answer the question of what you plan on using the annexe for and if it is forming a link detached house in the process.

For example, if you plan on developing an annexe for an elderly relative you’ll have to also consider whether there are care homes in the area and if it is also suitable for someone in a later stage of life.

In addition, if you have the annexe for use as a second income that you plan to rent out, consider if there is rental demand in the area as a result of the accessibility of the area too.

Finally, consider if the building with the annexe or the plan to add an annexe has the right parking or the permission to house an additional person based on parking restrictions. 

You may have to check this out with the local council or visit the government website for a broader overview here.

Do you have any design requirements?

Similar to the processes involved in building a large housing development, an annexe is usually built following the same design language as the rest of the property.

For example, if there is cladding in the property of a certain colour, you may want to reflect this in the design of the annexe. If you have a particularly unique property you plan on building an annexe on, this may prove difficult.

In addition, the closer you want an annexe to follow a certain design language, in general, the more this will cost you in the long run. If you want to save money, consider going for more basic design choices and perhaps a terraced house rather than one that is semi-detached or detached.

How can you get a mortgage on a property with an annexe?

If you aren’t buying a house with an annexe in cash or using a faster type of loan like in an auction for instance. You will need to speak to a broker to buy a house with an annexe.

In order to take out a mortgage, you’ll have to first analyse the type of property and then follow this process in more detail below.

Analyse the type of property it is 

Before you begin your application, there are certain questions that a lender will ask you anyway so it is important to gather as much information you can about the annexe before you start reaching out to mortgage brokers or mortgage companies.

The type of construction

First of all, the type of construction used will help the lender make a decision on the price of the annexe and if in the event that it was damaged how much it would take to repair.

The more expensive the materials of an annexe, as well as the mortgage of an annexe being larger, there is also a larger home insurance premium that must be paid and this is vital to gain approval for a mortgage too.

What planning permission you have

Having all the details in place for the planning permission of a property is what you’ll need to make sure you’re able to gain approval for a mortgage no matter if the property is unencumbered or not.

Lenders want to know that the annexe can go ahead with construction straight away and the annexe you’re buying isn’t going to run into any trouble. In most cases, you’ll have to gain complete approval.

What type of annexe it is

As you build an annexe, you can choose from various materials to add on the annexe, including options that are good for the environment. However, using materials that match the main property may increase its value if you decide to sell.

Prefabricated or flatpack buildings are also available for a developer’s convenience. So, if you plan to move the annex with you in the future, you can purchase a mobile home style annex that can be transported.

This type of annexe may not require planning permission, but it’s recommended to seek a certificate of lawfulness. Your conveyancer can provide more advice on this.

Speak to a broker

After you have finished considering the details of the annexe, speaking to a broker about the details and allowing them to give you an idea of what kind of mortgage you’ll be eligible for is the next step.

Like any other mortgage, as well as looking at the details of the report, they will look at the credit score and personal details of the person interested in buying a house with an annexe and will produce a mortgage in principle.

A mortgage in principle is an official document that a buyer can keep as evidence that they will be eligible for the mortgage they have applied for given a harder credit check that doesn’t return anything unexpected.

What are the advantages of buying a house with an annexe?

Amongst the benefits of having an annexe in a property, there is the fact that annexes add value to your home and you will be able to benefit from multiple dwelling relief.

Annexes add value to your home

While the amount of value that is added to a property varies on a case-by-case basis when it comes to granny annexes, the addition of an annexe will certainly add to the value of a home in general.

Whether it is worth the cost as an investment to install an annexe will have to be up to the developer and the landlord and this decision should be made after some careful analysis.

They add value because annexes make a property desirable for those looking to house older relatives and also may serve as a great way for someone to produce additional income by housing a lodger in their annexe for instance.

Multiple dwelling relief

Multiple dwelling relief is applied to properties that include more than a single dwelling. For example, if you have a house with a cottage that is separate to the original house or if there is of course an annexe.

This means you won’t have to pay as much stamp duty on the property in question and you can have more budget left over to do what you’d like with the property whether that be adding more rooms to buy furniture.

In particular, this tax benefit stands out to those who are looking to buy for an investment as the original purchase price compared to the building’s rental income is a big factor in considering if it is worth the purchase.

Click here if you want to find out more about the multiple dwelling relief works. The process includes separating the total purchase price by the number of dwellings, working out tax and then multiplying this tax again by the number of dwellings.

There is also a minimum rate of tax of 15 so for those looking to find a property that is completely stamp duty free, this is difficult unless the property doesn’t meet the stamp duty threshold.

Can provide useful additional space to your home

Additional space is useful not only for the financial benefit but also simply because you can use the space for whatever you please and the annexe will probably be fit to house a person.

Many people have outhouses and sheds that they spend time in but an annexe means you won’t ever have to leave to access any amenities like the bathroom or kitchen as this is all built into the design of an annexe.

In conclusion

When looking at annexes overall, first of all, what is notable about buying one is the additional decision making you have to do in order to make sure the property purchase is worth the time and money.

There are a good few factors that go into finding the right property for you and there is also the added complexity of finding a mortgage for an annexe on top of this.

So, make sure you collect as much information as you can before you go about applying for any type of mortgage and beware of the risks of buying an annexe. 

It should be clear that the advantages of buying an annexe outweigh these risks at all times.