What to consider before moving in to a granny annexe
House prices are continuing to rise, and the cost of living in a residential home for the elderly is escalating still faster. It is hardly a novel solution, but it means that the idea of the so-called “granny annexe” is making a noticeable comeback.
Quoting figures from the National House Building Council (NHBC), the Telegraph newspaper on the 3rd of February 2018, reported that the solution has been adopted by some 125,000 families in the UK and that 1.8 million households (or some 7% of all households) include two or more older generations.
The solution provides self-contained accommodation for independent living by an older couple or single person, with the advantage of family – and potential carers – also living close by. There are even savings to be made on the Council Tax paid on the two dwellings.
What to consider
Before deciding whether this might be an arrangement to suit you and your family as you approach retirement age, here are a few things you might want to consider:
- your reasons for moving into a granny annexe, extension or separate dwelling on your children’s property are likely to be influenced by the alternative costs of downsizing and, in time, needing to move into residential care;
- the aim is to cut costs, whilst retaining a more or less independent lifestyle;
- at some stage, however, the level of care that can be provided by your family may be inadequate, and you may still need to move into a long-term residential home;
- at that stage, you must remember, your share in the value of the property owned by you and your family continues to be taken into account by your local authority when determining whether any financial help is available for the cost of residential care;
- that makes it important to consider how your family shares ownership of the entire property, including the granny annexe, extension or outbuilding;
- if ownership is by way of joint tenancy, for example, when one party dies, the share in ownership automatically passes to the surviving owners;
- if owners are tenants in common, on the other hand, they may have unequal shares in the property and whatever proportion is owned may be bequeathed to any named beneficiary upon your death;
- the same degree of financial planning and forethought needs to go into your move into a granny annexe as any other housing choice;
- raising a mortgage is likely to be more difficult if the purchase of the shared property, or its extension and development, requires such a loan;
- in the first instance, lenders are reluctant to advance a mortgage to those who have already retired or are approaching retirement age; while
- in the second case, they are also wary of lending for the purchase of just a share in a property (because of the difficulties of repossession in the event of default on mortgage repayments).
In other words, the costs and legal implications of moving into a granny annexe need to be carefully weighed. Some shared living arrangements may be built as cheaply as £20,000 say reports in the Guardian and the Times newspapers on the 21st of February 2018, whilst the Telegraph’s example, reported on the 3rd of February provided a standalone annexe for a price of £135,000.
This data is correct as at the time of writing.