How much does a granny flat cost?

A look at the costs involved in building a granny flat and the options you have available for financing your home addition.

Last updated on April 21st, 2022 at 10:34 am by Cate Cook

Granny flat costs explained

Granny flat costs will naturally vary depending on the size of the structure you intend to build and whether you intend to build it under the main roof of your house or as a separate dwelling in your backyard.  You can compare loans with Savvy, bringing you clear comparison information so you’re able to make the best decision about which finance option is right for you.

What are the costs of building a granny flat?

Granny flat prices will depend on which of the following building options you choose for your new accommodation:

  • buying or building a separate dwelling in your backyard
  • converting an existing garage or shed into a granny flat
  • creating a separate living unit in existing rooms under the main roof of your home
  • extending your home to include space for a granny flat


Naturally, 2-bedroom granny flat costs will be higher than if you opt for a single bed unit.  Assuming you’re interested in a separate dwelling in your back yard, you have the options of:

  • designing and building a granny flat yourself (or getting an architect to design one for you)
  • buying an off-the-shelf granny flat design and building package
  • buying a flat-pack kit and building it yourself (or employing builders to erect it for you)
  • having a fully-constructed granny flat delivered and lifted into place onto a pre-prepared concrete slab

Which option you choose will depend, of course, on the size of your block, your requirements for the size of your granny flat and your budget.  In general, it will be cheaper to use existing rooms in your house to create your granny flat.  The next least expensive option is converting an existing garage or shed, and the costliest option will be buying a fully constructed granny flat and having it delivered to your property.

Costs to build a granny flat

According to National Seniors Australia, the average prices you can expect to pay for a kit granny flat with a slab, plumbing and electricity in 2022 might be:

  • 1-bedroom granny flat cost – $81,000 for a 38m 2 granny flat
  • 2-bedroom granny flat cost – $95,000 for a 50m 2 granny flat
  • 3-bedroom granny flat cost – $120,000 for a 71m 2 granny flat

 

Options that could be included in this price are:

  • Carpeted bedroom
  • Bathroom and enclosed shower
  • Kitchen including laminate benchtops
  • Separate laundry tub
  • Electrical wiring including power points

In addition to the cost to build a granny flat, what other costs may be involved?

As well as bank fees and any state government or council fees you will be liable for to gain council development approval, you’ll also need to consider the cost of getting electricity, gas and plumbing connected to your new granny flat, as well as the cost of phone and internet connections. 

You may also need to put aside funds towards legal costs to cover the advice needed for the purchase and construction of your new accommodation, plus the cost to get a granny flat agreement written up if you are advised that this is a good idea.

What are my options for getting a loan to finance my granny flat?

The costs to build a granny flat will also depend on your current financial situation, whether you have any usable equity in your home and your current lender’s loan policy towards finance for granny flats.  Your loan options include:

  • a top-up loan to your existing loan with the same lender
  • a new investment loan refinance either with your existing lender or a new lender
  • a new loan which includes a cash-out option which you could use to buy your granny flat
  • a new separate construction loan as a second mortgage either with your existing lender or a new lender

Naturally, your best option is to use any savings you may have to fund your new granny flat, but if you need additional finance, you should talk to your existing lender first.  Getting a top-up loan will probably be your cheapest option, as you will avoid the additional loan discharge fees and mortgage establishment fees that may be charged if you swap to another lender or start up a new loan. It can cost up to $1,500 to refinance a home loan, depending on whether you have any early exit fees for a fixed rate loan, or whether your existing loan is a variable one which allows more flexibility.

Compare loans to save money

If you compare your loan options with Savvy and find that you can get a far cheaper mortgage rate than your existing loan, you may be better off paying these additional loan switching costs for the long-term gain of refinancing to access a far cheaper interest rate which could save you thousands in interest payments over the life of the loan.

Cashback offers can also assist to offset the cost of swapping home loans.  These offers on home loans (ranging up to $6,000) could help you to swap to a cash-out loan and have money left over to pay for furniture for your new granny flat.

More frequently asked questions about granny flat costs

Do I need council approval for my granny flat?

Some states of Australia actively encourage people to build granny flats, with no need to get council approval as long as certain land size requirements are met (such as in NSW).  In other states (such as SA), you will need planning approval and you’re prevented from building a granny flat for any purpose other than housing an immediate relative. You also won’t be permitted to rent out a granny flat to a student or use it for Airbnb income purposes in this instance.

What are the council minimum land requirements for building a granny flat?

In NSW and many other states, there is a minimum lot size of 450 m2 and a granny flat size limit of 60 m2.  In SA, though, the minimum land size requirement is 650 m2.  Before planning your granny flat, you should visit your local council building and planning department and find out what the regulations are for your state and council area, as well as what the process is to get a development application approved (if one is required).

Can I add a garage to my granny flat?  Will this affect the approval process?

Most council regulations require people using the granny flat to use the same entrance as the main dwelling, so unless you’re on a corner block, it’s unlikely that you’ll be able to include an additional garage.  However, most states have a minimum requirement for outside recreation space around the granny flat, starting at 24 m2, so you’ll have to plan for this additional space when designing the area around your granny flat.

How much equity do I need in my home to get a top-up loan?

You’ll need at least 20% of the value of your property as security for your existing loan.  To calculate how much usable equity you have in your home, use the following calculation:

  • Current value of your home x 0.8 = 80% of the value of your home
  • 80% value of your home – your remaining loan debt = the amount of free usable equity you currently have in your home.

This is the amount that a lender may give you as a cash-out option if you refinance your loan and add to your current loan with a top-up.  Use Savvy’s calculator to find out how long it will take you to repay your loan so you can experiment with different repayments until you find a level which fits in with your existing commitments.