Finance Your ADU Project with Confidence
Build new homes or convert existing spaces into additional dwelling units with three primary financing solutions for your ADU project.
Multiple Options
Choose from HELOC, Cash-Out Refi, or Construction Loans
Competitive Rates
Access the best rates for your ADU financing needs
Expert Guidance
Local expertise to help you select the right option
Equal Housing Lender • Loans originated by Nick Petrosov (NMLS #2015537) through Guild Mortgage Company (NMLS #3274)
Licensed in California. This is not a commitment to lend. All loans subject to underwriting and credit approval.
Compare Your Financing Options
Review each option below to understand the requirements, advantages, and considerations for HELOC/HELOAN, Cash-Out Refinance, and Construction Loans.
HELOC / HELOAN
Home equity line of credit or loan for ADU construction
Key Program Details
Advantages
- HELOC: Flexible draw period, use as needed
- HELOC: Interest-only during draw period
- HELOAN: Fixed rate and predictable payments
- Maintain existing first mortgage
- Only borrow what you need
Considerations
- HELOC: Variable rates can increase
- Second lien adds monthly obligation
- Closing costs may apply
- Reduces available equity
- Qualification depends on CLTV
Best For
Homeowners who want to fund their ADU project while maintaining their existing mortgage. HELOCs are ideal for phased construction, while HELOANs work well for one-time projects.
Learn More About This Option
A Home Equity Line of Credit (HELOC) or Home Equity Loan (HELOAN) allows you to borrow against the equity in your home. HELOCs provide flexible access to funds as you need them during construction, while HELOANs provide a lump sum upfront. Both options are ideal for homeowners who want to fund their ADU project while maintaining their existing mortgage and only borrowing what they need for the construction.
Cash-Out Refinance
Tap existing home equity to fund your ADU project
Key Program Details
Advantages
- Lower rates than HELOC typically
- Fixed or adjustable rate options
- Tax-deductible interest (if used for improvements)
- Single monthly payment
- Can refinance at better rates
Considerations
- Requires significant home equity
- Refinances entire mortgage
- Closing costs apply
- May extend loan term
- LTV limits apply
Best For
Homeowners who already own their home and have built substantial equity. Ideal for those who want to take advantage of potentially lower interest rates while funding their ADU build.
Learn More About This Option
If you already own your home and have built equity, a cash-out refinance allows you to refinance your existing mortgage for more than you currently owe and receive the difference in cash. This cash can then be used to fund your ADU construction project. This option is ideal for homeowners who have significant equity and want to take advantage of potentially lower interest rates while funding their ADU build.
Construction Loans
One-time-close construction-to-permanent loans for new ADU builds
Key Program Details
Advantages
- Single closing for construction and permanent loan
- Interest-only payments during construction
- Automatically converts to permanent financing
- Ideal for new ADU builds
- Combines mortgage and construction costs
Considerations
- Higher down payment requirements
- More complex approval process
- Requires construction expertise
- Timeline and budget constraints
- Higher rates during construction phase
Best For
Borrowers purchasing or refinancing a 1-unit property and constructing a new ADU. Ideal for new builds where you need financing for both the property and construction work.
Learn More About This Option
Borrowers looking to purchase or refinance a 1-unit property and construct a new ADU can use a renovation loan to finance it. This loan type combines your mortgage and construction costs into one loan, making it ideal for new ADU builds where you need financing for both the property and the construction work.
Side-by-Side Comparison
Quick reference comparison of all three financing options
| Feature | HELOC / HELOAN | Cash-Out Refinance | Construction Loans |
|---|---|---|---|
| Best For | Phased or one-time projects | Existing homeowners with equity | New ADU builds |
| Down Payment/Equity | 20%+ equity recommended | 20%+ equity recommended | 10-20% |
| Credit Score | 680+ | 680+ | 680+ |
| Rate Type | HELOC: Variable, HELOAN: Fixed | Fixed or Adjustable | Fixed or Variable |
| Payment During Project | HELOC: Interest-only, HELOAN: P&I | Principal + Interest | Interest-only |
| Closing Costs | Typically lower than refi | Refinance closing costs | Standard mortgage closing |
| Loan Structure | Second lien, keeps first mortgage | Refinances entire mortgage | One-time close, converts to permanent |
| Flexibility | HELOC: Draw as needed, HELOAN: Lump sum | Lump sum upfront | Structured draw schedule |
| Tax Benefits | Interest may be deductible | Interest may be deductible | Interest may be deductible |
| Feature | HELOC / HELOAN | Cash-Out Refinance | Construction Loans |
|---|---|---|---|
| Best For | Phased or one-time projects | Existing homeowners with equity | New ADU builds |
| Down Payment/Equity | 20%+ equity recommended | 20%+ equity recommended | 10-20% |
| Credit Score | 680+ | 680+ | 680+ |
| Rate Type | HELOC: Variable, HELOAN: Fixed | Fixed or Adjustable | Fixed or Variable |
| Payment During Project | HELOC: Interest-only, HELOAN: P&I | Principal + Interest | Interest-only |
| Closing Costs | Typically lower than refi | Refinance closing costs | Standard mortgage closing |
| Loan Structure | Second lien, keeps first mortgage | Refinances entire mortgage | One-time close, converts to permanent |
| Flexibility | HELOC: Draw as needed, HELOAN: Lump sum | Lump sum upfront | Structured draw schedule |
| Tax Benefits | Interest may be deductible | Interest may be deductible | Interest may be deductible |
Ready to Finance Your ADU Project?
Let's discuss which financing option works best for your ADU project and get you pre-approved today.