Granny flats are a smart solution for families, investors, and retirees across Victoria. But like any building project, cost is always a concern. Whether you’re planning to house an extended family, generate passive rental income, or add value to your existing property, understanding how to finance a granny flat build without overstretching your budget is essential.
Fortunately, with proper planning, realistic budgeting, and the right builder, granny flats can be one of the most cost-effective property upgrades on the market. In this article, we’ll explore the key financing options, hidden cost traps, and how Innovista Group is helping homeowners build affordably without sacrificing quality.
Why Granny Flats Are a Cost-Effective Investment
Unlike full-sized houses, granny flats typically range between $170,000 and $250,000 in Victoria, depending on size and specification. They don’t require subdivision, rarely need additional titles, and are faster to build, typically completed in 16 to 20 weeks.
That means lower holding costs, less red tape, and a quicker return on investment. And thanks to the high quality of designs like Innovista’s Lana 43 and Lana 60, you’re not compromising on livability.
When designed for long-term use or rental income, the value generated often outweighs the cost of the build within a few years, especially when paired with house and granny flat packages that make an ideal setup for first-time home buyers.
Option 1: Releasing Equity From Your Existing Home
This is the most common financing method. If you own your home and it has grown in value, you can access equity through a line of credit or a home loan top-up.
For example, if your property is worth $950,000 and you owe $550,000 on your mortgage, you may be able to access up to 80% of the value ($760,000), giving you $210,000 in available equity.
Hot Tip: Many Innovista clients choose this route as it offers low interest rates and doesn’t involve new Hot Tip: Many Innovista clients choose to refinance their existing home loan to fund their build, as it often comes with lower interest rates and avoids the need for new lending products. If you indicate to your bank or broker that the refinance is for investment purposes, the interest on the redrawn equity may even be tax-deductible, potentially offering significant end-of-year tax benefits.*
This is general information only and not financial advice. Please consult your accountant to understand what applies to your circumstances.
Option 2: Personal Loan or Construction Loan
For those without enough equity, a personal loan or a tailored construction loan may be a viable path. At Innovista, we support you through the permit and approval process and arrange an “as if complete” valuation to help you secure a construction loan. These loans typically offer up to a 70% loan-to-value ratio (LVR), meaning you’ll need around 30% of the build cost in savings, significantly lowering the barrier to entry if you’ve already set aside cash for your granny flat
Innovista’s fixed-price contracts and transparent costing are particularly attractive to lenders, who want to know what you’re committing to. With staged payments and no surprise variations, lenders see these builds as low-risk.
Option 3: House and Land Packages with Granny Flat Potential
If you’re looking to buy property with the future intent to build a granny flat, selecting land that allows secondary dwellings is key.
Innovista advises on house and land packages in areas like:
- Werribee
- Melton
- Craigieburn
- Tarneit
- Cranbourne
- Clyde
- Berwick
These areas not only allow for second dwellings but also offer growing rental demand and solid resale potential.
Choosing a package with flat, rectangular land makes it easier and cheaper to add a granny flat later. Some forward-thinking buyers factor in the build cost upfront and finance the entire package together.
Option 4: Self-Funding with Cash or Offsets
If you’ve saved cash or have funds in an offset account, building a granny flat outright avoids any additional interest expense. While this option isn’t for everyone, many downsizers or retirees use this strategy to build a secondary dwelling for ageing parents or independent children.
It can also be used to create a future rental stream that supplements pension income or early retirement.
Tips to Stay on Budget
Financing is just one part of the puzzle. To truly build affordably, you need to manage costs during the design and construction phase, too. Here’s how:
- Choose a fixed-price builder like Innovista
- Avoid unnecessary luxury upgrades that don’t increase resale value
- Opt for a Signature finish if you’re renting
- Design within the existing site constraints to avoid planning permits
- Keep driveways, landscaping, and fencing simple to reduce external works
With a clear plan, you’ll avoid the biggest budget killer: last-minute changes.
How Innovista Group Helps Clients Build Smarter
Innovista doesn’t just build, they guide. From helping you identify whether equity release is an option to connecting you with mortgage brokers and assessing your block’s potential, their service is designed around cost certainty.
Clients benefit from:
- All-in-one service from feasibility to final handover
- Access to energy-efficient designs that reduce long-term costs
- Inclusion-rich packages that save money on upgrades
- Transparent contracts that keep your budget in check
They also offer consultations to discuss how to build in stages, spreading out costs and allowing you to start small with room to grow.
Final Thoughts: Building Affordably Is Possible
Granny flats are not just affordable, they’re one of the most efficient ways to increase property value and financial flexibility. Whether you’re tapping into equity, bundling your build into a new land purchase, or paying outright, there are many pathways to making your project financially viable.
With the right builder, smart decisions, and a clear plan, your second dwelling doesn’t have to become a financial strain.
Have questions about pricing, permits, or timelines? Contact us and we’ll walk you through the process.
