Applying the First Home Owners Grant to Granny Flats

Many first home buyers ask whether the First Home Owners Grant to granny flats can help fund their build. With rising property prices and affordability pressures across NSW, granny flats are increasingly seen as a smart housing solution — but the rules around grants can be confusing.

This guide explains how the First Home Owners Grant (FHOG) applies to granny flats in NSW, what’s allowed, and what alternative options may be available.

1. What Is the First Home Owners Grant?

The First Home Owners Grant is a NSW Government incentive designed to help eligible first home buyers purchase or build a new residential home.

In NSW, the grant generally applies to:

• Newly built homes
• House-and-land packages
• Off-the-plan purchases

To qualify, the home must meet eligibility requirements relating to ownership, value thresholds, and occupancy.

2. Does the First Home Owners Grant Apply to Granny Flats?

In most cases, the First Home Owners Grant to granny flats does not apply when a granny flat is built as a secondary dwelling on an existing property.

This is because a standard granny flat is not considered a separate “new home” for FHOG purposes — it is classified as an ancillary dwelling linked to the primary residence.

However, there are limited scenarios where eligibility may be considered, depending on ownership structure and how the dwelling is classified.

3. When a Granny Flat May Be Eligible

In rare cases, the First Home Owners Grant may apply if:

• The granny flat is constructed as part of a new primary residence, and
• The applicant qualifies as a first home buyer for the main dwelling

In this scenario, the grant applies to the principal residence, not specifically to the granny flat itself.

Independent advice from a solicitor or Revenue NSW is essential before relying on grant eligibility.

4. Common Misconceptions About FHOG and Granny Flats

Many homeowners assume the First Home Owners Grant to granny flats applies automatically. Common misunderstandings include:

• Assuming all new builds qualify for the grant
• Believing a granny flat counts as a separate first home
• Expecting the grant to apply when building for rental purposes
• Confusing FHOG with stamp duty concessions

Clarifying these points early helps avoid costly planning or finance assumptions.

5. Alternatives to the First Home Owners Grant

Even if the First Home Owners Grant does not apply, granny flats can still offer strong financial benefits, including:

• Rental income to support mortgage repayments
• Increased overall property value
• Long-term flexibility for family or future resale
• Potential tax benefits (subject to professional advice)

Many homeowners build granny flats without relying on grants and still achieve excellent returns.

6. Finance Considerations When Building a Granny Flat

Lenders typically assess granny flat projects differently from first-home purchases. Important considerations include:

• Equity available in the existing property
• Construction loan requirements
• Rental income servicing (in some cases)
• Turnkey build contracts and fixed pricing

Working with a specialist granny flat builder can help ensure your project is structured correctly for finance approval.

Our Tip

Always confirm grant eligibility directly with Revenue NSW or your financial adviser before making design or budget decisions. Grant rules can change, and incorrect assumptions may impact your finance strategy.

Why Choose Granny Flat Solutions

At Granny Flat Solutions, we help homeowners navigate the practical and financial realities of building granny flats across NSW. While the First Home Owners Grant to granny flats is limited, our team focuses on delivering compliant, high-quality builds that maximise long-term value.

With turnkey pricing, in-house approvals, and thousands of completed projects, we guide you from feasibility through to handover with clarity and confidence.

Considering a Granny Flat Build?

If you’re exploring whether a granny flat is right for your property — with or without government grants — we’re here to help.

Book your free site consultation with Granny Flat Solutions today and receive expert advice tailored to your goals and circumstances.