ADU Financing Options: Every Way to Pay for an ADU
Most ADUs are paid for with one of five things: home equity, a construction loan, a refinance, a government backed loan, or a grant that covers part of the early costs. Here is how each works, who each suits, and how to talk to a lender who actually finances ADUs.
- We explain every option, not just one product
- Matched with lenders who finance ADUs
- No obligation to take any offer
Start with three questions
The right way to finance an ADU depends less on the ADU and more on your house and your mortgage. Before you compare loans, answer three questions.
If the answer to the third question is yes, home equity is usually the simplest route. If it is no, look at loans that lend on the value of the finished property.
- How much equity do you have after your current mortgage?
- Is your current mortgage rate one you want to keep?
- Does the full project budget, including permits and utility work, fit inside that equity?
ADU Financing Options We Cover
Each option below has a plain English breakdown of how it works, the trade offs and when to choose it.
ADU construction loans
Paid to your builder in draws as the unit goes up, then converted or refinanced.
ADU loans
The main loan types side by side, and how to pick between them.
ADU loan calculator
Estimate a payment from the rate, term and amount a lender quoted you.
ADU loan rates
What moves the rate on an ADU loan and how to compare offers fairly.
HELOC for an ADU
Draw on your equity as builder invoices arrive.
Home equity loan for an ADU
One lump sum at a fixed rate, with your first mortgage left alone.
Cash-out refinance for an ADU
Replace your mortgage with a larger one and use the difference.
VA loan for an ADU
What VA financing can and cannot do for a backyard unit.
FHA and 203k loans for an ADU
Government backed routes for buying or converting.
Using ADU rental income to qualify
When lenders can count future rent from the unit.
Garage conversion ADU financing
Costs and loan fit for the smallest ADU projects.
Prefab ADU financing
How to fund factory deposits before anything arrives on site.
ADU grant and loan programs
Public programs that can cover early costs.
How getting matched works
We do not lend money, and we never ask for your Social Security number. Any credit application happens directly with the lender you choose.
1. Tell us about the project
ADU type, rough budget, timeline and ZIP code. It takes about two minutes.
2. We connect you with a lender
We pass your details to a lender who finances ADUs and offers the kind of loan that fits what you told us.
3. You compare and decide
The lender quotes real terms. You decide whether to go ahead. There is no obligation to take any offer.
ADU financing questions
What type of loan is best for ADU?
There is no single best loan. Owners with plenty of equity and a low first mortgage rate often use a HELOC or home equity loan. Owners with less equity often need a construction or renovation loan that lends on the finished value. Veterans and first time buyers may have government backed routes.
What is the cheapest option for an ADU?
In building terms, converting existing space such as a garage is usually cheaper than a new detached unit. In borrowing terms, the cheapest loan is the one with the lowest total cost over the time you will hold it, which depends on your equity, credit and plans.
Does California offer grants for ADU?
California has run a state ADU grant through CalHFA that reimburses certain predevelopment costs for eligible owners, and some cities run their own programs. Funding opens and closes, so check the agency's current status before you plan around it.
Talk to a lender who finances ADUs
Share a few details about your project and we will connect you with a lender who finances ADUs, so you can compare real terms instead of guessing.
Talk to a specialist: (555) 555-0141
Thanks. We have your details and a lender who finances ADUs will be in touch, usually within one business day.