ADU Financing

Below is a brief overview of the most popular ADU financing options. If you are interested in learning more, our trusted partners are on hand to delve into the details and help tailor a solution that best suits your specific needs.

ADU Financing Options

Utilize your home equity through either a Home Equity Line of Credit (HELOC), offering a flexible credit line with variable interest rates, or a Home Equity Loan (Second Mortgage), a fixed-amount loan with costs similar to a first mortgage. 

This option allows you to refinance your existing mortgage with a new, larger one, providing extra funds from your home equity to finance your ADU. It’s a popular choice due to typically lower interest rates compared to other loans. 

Ideal for those with less than 30-40% home equity, this loan is based on your home’s projected post-improvement value. It involves periodic fund releases during construction but often converts to long-term financing at the end of the term. 

If you lack savings or home equity, a personal loan, line of credit, or even a credit card might be an option, though they come with higher interest rates and lower borrowing limits. 

Suitable for real estate investors or multifamily-property owners, these loans from private entities offer flexible, short-term financing at higher interest rates, often requiring rental income for repayment. 

- California: Explore state grants and incentives like the CalHome Program, LEAP grants, and the LHTF Program.

   - Nationwide: HUD’s housing choice voucher program and the Servicemembers Civil Relief Act offer indirect financial support. State housing finance agencies also provide various assistance programs. 

Emerging technologies and crowdfunding have introduced new financing avenues like peer-to-peer lending, equity investments through platforms like Point, and real estate debt investment services like PeerStreet. These innovative options are worth exploring. 

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