Can I get a reverse mortgage to finish building a granny flat?

Do I need an income to get a reverse mortgage?

No. There are no regular repayments. Interest is added to the loan, which is usually repaid when you sell, move out permanently or pass away. So lenders mainly look at your age and your home, not your income. Minimum ages range from 55 to 65, depending on the lender. See Can I actually qualify for a reverse mortgage?

Can a reverse mortgage pay for building work?

Yes, in general. Heartland, Household Capital, Gateway, Inviva, P&N Bank, Unity Bank and A.S.A.G. all list home renovations or improvements as a use. Gateway's website even mentions building a granny flat. See What can you actually use a reverse mortgage for?

The catch is the property, not the purpose.

Why does an unfinished granny flat matter?

Three reasons:

• Property rules. Heartland asks for a "residential property of conventional construction and in good repair". A.S.A.G. asks for a home "of standard construction and in good repair". A site with open building work may not fit that wording until it's finished.
• Valuation. You can borrow a percentage of your home's value, rising with age. See How much can I borrow at my age? A valuer looks at the property as it is on the day. A half-built granny flat may add little or nothing, and may raise questions about approvals, safety or insurance.
• It isn't a construction loan. Building loans pay the builder in stages after inspections. A reverse mortgage pays the money to you, and finishing the work is up to you.

For comparison, many ordinary home lenders want an "on completion" valuation for building work, pay in stages, and wait for an occupancy certificate before the final payment. Some won't accept a partly built property at all. Reverse mortgages are different products, but this shows why an unfinished build gets a closer look.

What will a lender or valuer want to see?

Expect questions about:

• Approvals and sign-off. In Victoria, for example, a small second dwelling normally needs a building permit (Planning Victoria: Small second homes). When the work is done, the building surveyor issues an occupancy permit or a certificate of final inspection. If a permit lapses before the work is finished, you may need a new one (Building and Plumbing Commission: Lapsed permits). Other states differ, so check with your council. Without sign-off, the granny flat may not count as finished.
• Insurance. The Home Equity Access Scheme, for example, asks for cover of at least 90% of the buildings' value.
• Who lives there. Tell the lender if anyone else lives on, or will move onto, the property. If you're the only borrower, other people may have to leave when the loan ends.

Will it affect my Age Pension?

Money from a reverse mortgage isn't counted as income. Centrelink doesn't count the first $40,000 you haven't spent as an asset for 90 days, but anything over $40,000, or still unspent after 90 days, can count (Social Security Guide 4.6.5.90). So the timing of a lump sum compared with your builder's bills can matter. See Will a reverse mortgage affect my Age Pension?

Granny flat rights are different. They apply when someone pays for a right to live in a property they don't own, such as a parent paying for a granny flat on a child's land. You can't have one in a home you own (Services Australia: Granny flat interest). If a relative is chipping in for a right to live there, they should get advice first. If someone pays you rent or board, tell Centrelink.

What are my options?

1. Finish first, then apply. Once signed off, the granny flat may count in the valuation.
2. Borrow on today's value, if a lender accepts the property as it is. Get a fixed quote first so you know the money will finish the job.
3. Take it in stages. Gateway's Access option lets you draw up to your approved limit, and Heartland allows further advances (minimum $5,000). Drawing only what you need means less interest. See Can I take the money as a lump sum, regular payments or a line of credit?
4. The Home Equity Access Scheme (HEAS). This government loan pays fortnightly, with lump sum advances of up to 50% of the maximum pension rate in any 26 fortnights. If your home's value rises after the work, you can ask Services Australia to raise your maximum loan amount. As at 4 November 2026, the rate is 3.95% a year. Check the current rate at Services Australia: Home Equity Access Scheme. See What's the difference between a reverse mortgage and the Home Equity Access Scheme?
5. Other help, such as family support, a smaller build, or selling another asset.

Before you decide, run projections with the reverse mortgage calculator, compare lenders, and get independent legal advice.

Frequently asked questions

Can I get a reverse mortgage if my home is still being built?

It's harder. Lenders need a property they can value and accept as security. A lender may want the work finished first, or lend only on today's value.

Do I need to be working to get a reverse mortgage?

No. There are no regular repayments, so lenders focus on your age and your home rather than your income.

Will a finished granny flat increase how much I can borrow?

It might, if a valuer says it adds value and it has the right approvals. It's not guaranteed.

Does a granny flat on my own land create a "granny flat right"?

No. Granny flat rights apply when someone pays to live in a property they don't own.

Talk it through

Part-way through a build? A Fundd broker can explain your options, with no obligation. We're based in Melbourne and work with a range of lenders. A broker may tell you a reverse mortgage isn't right for you. Call 1300 038 633 or speak to a broker. Brokers are paid commission by lenders and, in some cases, a fee. Read how we make money.