With the peak of the Australian property market in most capital cities passing for now, you may be searching for ways to add more value to your home.

Analysis by CoreLogic and Archistar found that more than half a million homeowners across Sydney, Melbourne and Brisbane “have enough land to build another dwelling on their property”, such as a granny flat.

Building a granny flat may increase the market value of your home by 30 per cent, according to CoreLogic/Archistar modelling. You may also be able to rent out your granny flat or put it up on AirBnb and other short-term accommodation sites to take in some additional revenue from tenants.

The analysis also found that building a one-bedroom granny flat costs around $120,000, and an extra bedroom costs around $80,000 or more.

Forking out this kind of cash is a hard ask for may Australians, so here are two common ways you can finance your new build:

1. Redraw on your mortgage

If you have made extra payments on your mortgage and have a redraw facility, you can access the extra money you’ve paid and use it to finance your renovations.

This can be a competitive option if you want to avoid the hassle of additional debt, such as putting your renovation on a credit card or taking out a personal loan.

However, keep in mind that you will lose the benefit of reduced interest charges on your mortgage because your loan balance will go up. Some lenders will limit the amount and frequency of redraws, as well as charge fees to deposit and withdraw.

If you want to take the redraw route, but your home loan does not offer this feature, you may want to consider refinancing to a home loan that allows this. The issue would then be waiting a few more years to build your granny flat after you’ve made enough additional payments to fund this project.

Search and compare home loans with redraw facilities now.