Cash-out refinance or construction loan for granny flat?

Smaller: cash-out refinance. Larger/complex: construction loan with progress draws.

How much equity needed?

Typical $150K granny flat needs $150K usable equity within 80% LVR.

Will granny flat add property value?

Yes — typically 60-80% of build cost added in value, plus rental potential.

Tax implications of granny flat?

Rental: taxable + deductible. Family rent-free: usually no tax. Confirm with accountant.

Council approval needed?

Yes — council approval needed before construction loan release.

Home Loan Refinancing

Who this guide is for

Australians building a granny flat on their existing property — for parents/in-laws to live in, adult children, or rental income.

Multi-generational South Asian families housing parents
Adult children moving into family granny flat
Investors adding granny flat for additional rental income
Bangladeshi families wanting flexibility for visiting overseas family

The local picture

Granny flat funding has multiple pathways. Construction loan for new build. Equity release from existing property. Each has different rates, structures, and tax implications. Council approval timing matters too.

How Mortgagefy helps locally

Mortgagefy walks you through granny flat funding options based on your situation. We identify the right structure for your specific build and family use.

Free advice.

How it works — 4 simple steps

Free granny flat chat

20-minute call about your build plans.

Map funding options

We outline construction loan vs equity release.

Compare lender options

We identify lenders comfortable with granny flat funding.

Build the granny flat

Funds released, build starts.

Frequently asked questions

We use offer letters and vesting schedules to value RSUs conservatively. We present current vesting value + projected future vesting as a 3-5 year income average. This gives lenders confidence in your income stability while accounting for market volatility.

Both. We work with W2 employees, 1099 contractors, and consultants. For contractors, we use 2 years of tax returns plus business financials. We have lenders who specialise in contractor income—they understand the variability.

Unvested options have zero value for refinancing. We count only vested equity. If you have a 4-year vest, we use 25% of the grant value (what's vested) plus a conservative projection of future vesting.

If you've been in your new role 6+ months, most lenders will refinance. We'll use your offer letter plus 6 months of pay stubs. If less than 6 months, it's harder but possible with specialist lenders.

Yes, if you have 2+ years of bonus history. We average the past 2 years and present it conservatively. Some bonuses get counted at 50% to be conservative with variable compensation.

ESPP is counted as deferred compensation. If your company matches or you have a discount, we value it as part of total compensation package.

Talk to us about granny flat finance

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Home Loan for Granny Flat in Australia: Multi-Generational Living and Income