Financing Your ADU: Options for Homeowners
Financing your accessory dwelling unit (ADU) doesn’t have to be overwhelming. With the right approach and a clear understanding of your options, you can start your project confidently and choose a path that aligns with your goals. At MF ADU, we guide homeowners in understanding available financing methods so their ADU is both affordable and successful from the start.
Using Cash or Personal Savings
One of the most straightforward ways to finance your ADU is by using savings or available funds. This eliminates interest payments and avoids the loan approval process, giving homeowners full control over their investment.
Cash financing is often best when homeowners are comfortable allocating funds without impacting other long-term financial plans.
Home Equity Loans
Home equity loans allow you to borrow against the equity you’ve built in your property. These loans typically come with fixed interest rates and repayment terms, making monthly costs easy to predict.
Benefits of home equity loans include:
Competitive interest rates
Longer repayment periods
Straightforward approval
This is a popular choice for homeowners who want flexibility and stability in their financing.
Home Equity Line of Credit (HELOC)
A HELOC is similar to a home equity loan but offers a revolving line of credit you can draw from as needed. Interest rates may vary, but homeowners appreciate the versatility if project costs change.
HELOCs are ideal when you need ongoing access to funds throughout the project.
Construction Loans
Some banks provide construction loans specifically designed for home improvement. These loans release funds in stages and convert into a permanent mortgage once the project is complete.
Because ADUs add property value, many lenders view these projects as strong investments.
Cash-Out Refinance
With a cash-out refinance, you replace your existing mortgage with a new one and receive extra funds to use for your ADU. Many homeowners choose this option to take advantage of better interest rates while securing financing for construction.
Did you know?
Did you know? Adding an ADU can increase the value of your home and generate rental income—making financing easier to justify long-term.
MF ADU Makes the Process Easier
Financing your ADU starts with understanding the option that fits your needs best. At MF ADU, we help homeowners explore solutions and plan smarter, more affordable projects from day one.
Take the next step toward building your ADU by exploring our prefabricated ADU models.
Frequently Asked Questions
How do I know which financing option is best?
It depends on your goals, savings, credit, and long-term financial plans.
Can I finance an ADU if I still have a mortgage?
Yes. Options like cash-out refinancing and HELOCs are commonly used.
Does adding an ADU increase my home’s value?
Yes, ADUs are known to boost property value and can generate rental income.
Do banks offer loans specifically for ADUs?
Many lenders offer construction or renovation loans suitable for ADU projects.
Can MF ADU help me plan my project around my budget?
Absolutely. We guide homeowners in selecting the right model and budget approach.