Discover The Ideal Financing Solution For Your ADU Project

 

Learn more about our trusted lenders, and request an ADU property analysis and estimate today!

Go-ADU-Favicon-1

Investing in an ADU: A Smart Financial Move

3 Factors Fueling The ADU Trend

Right Arrow

Regulatory Changes

Legislative adjustments across the United States have relaxed strict regulations surrounding ADU construction. These reforms empower homeowners with greater flexibility to embark on ADU projects.

Right Arrow

Addressing Housing Shortages

The ongoing housing shortage, particularly prevalent in densely populated regions like Los Angeles, has prompted homeowners to turn to ADUs as a viable solution. These additional units serve as much-needed housing for extended family members or can be rented to alleviate housing demand.

Right Arrow

Lucrative Investment Potential

By renting out these supplementary units, homeowners can generate a steady income stream. Additionally, investors can diversify their portfolios by incorporating ADU properties, capitalizing on the growing demand for affordable housing options.

Land Home

Land Home

Explore flexible financing solutions tailored to your property aspirations.

Learn More
Meredith

Team Meredith

Expert guidance and personalized support to help you choose the best financial option for your project.

Learn More

ADU Financing Options in Los Angeles

Cash-Out Refinance

Consider refinancing your existing mortgage to access cash from your home's equity, typically up to 80% of its value. This option offers lower interest rates and the potential to reduce monthly payments by replacing your current mortgage with a new one.

Renovation Loan

Explore securing funds for your ADU project with a renovation loan, which is a personal loan unsecured by your property. While this option is faster and relies more on your income qualifications than property equity, be prepared for higher interest rates and shorter payback periods.

Construction Loan

If you're embarking on a significant ADU project, a construction loan may be suitable. These loans typically allow you to borrow a percentage of your completed ADU's value (around 80-95%), but they are short-term and require detailed plans, schedules, and budgets from a licensed contractor.

Home Equity Loan

Leverage your home's equity with a home equity loan, which provides a lump sum upfront. This option offers a fixed interest rate for stability but may come with higher rates compared to primary mortgages and shorter payback periods.

Home Equity Line of Credit (HELOC)

A HELOC allows you to tap into your home's equity as needed, providing flexibility in borrowing and repayment. However, be mindful of fluctuating interest rates that could increase over time.

FHA & Fannie Mae Loans

Explore specialized financing programs such as FHA's 203k Loan and Fannie Mae's HomeStyle loan, designed for purchasing properties and undertaking ADU construction or remodeling. These programs may offer more flexibility but could involve slightly higher interest rates and additional closing costs.

Freddie's Choice Renovation Mortgage

New financing options from Freddie Mac make ADU projects more accessible, allowing first-time buyers to qualify with as little as 3% down. This option opens doors for obtaining loans for single-family primary residences with an ADU or duplex/triplex properties

CalHFA ADU Grant Program

The California Housing Finance Agency (CalHFA) offers grants of up to $40,000 for ADUs. These grants cover pre-development and non-recurring closing costs associated with constructing an ADU. CalHFA’s initiative aims to make ADUs more accessible and contribute to addressing the housing shortage in California. For more details, visit the official CalHFA ADU Grant Program page.

Contact Our Team

Frequently Asked Questions

How do I compare my options for ADU financing?

You can compare loan options for your back house or granny flat, including cash-out refinances, HELOCs, construction loans, etc. We make it easy to include estimated ADU costs and your home’s approximate value to crunch the numbers, determine your eligible plans, and offer the best terms. When it’s time to shop for financing, we can help pair you with lenders we have worked with successfully to make our clients’ ADU vision a reality.

What financing options are available for an ADU?

We work directly with several lenders and financing providers. We can provide an array of options for financing the construction of your ADU

Is construction financing available for an ADU?

Absolutely. GoADU can work with your lender to ensure you have the budget, plans, and scope of work needed for your loan application and documentation. If you don’t already have contacts with construction lenders, we are happy to connect you with several we have worked with successfully.

Can the potential income from an ADU be added to the property value for the purpose of financing?

To approve a construction loan, the lender typically requires a floor plan with elevations, a scope of work, and a budget that includes all construction costs broken down by trade (plumbing, electrical, framing, sheetrock, insulation, etc.). The process can be much smoother if the lender has worked with the contractor before, as the lender will be familiar with the contractor’s work and documentation, and the contractor is familiar with the lender’s requirements. If you are purchasing a new property with the intention of installing an ADU, if at all possible, we recommend negotiating an extended due diligence period of 75-90 days to research the feasibility of the ADU, consider any site requirements, and report your ADU plan to the lender so they can order an appraisal of the property based on its estimated future value with the ADU.

What does my lender need to know about my ADU plan to approve my construction loan?

To approve a construction loan, the lender typically requires a floor plan with elevations, a scope of work, and a budget that includes all construction costs broken down by trade (plumbing, electrical, framing, sheetrock, insulation, etc.). The process can be much smoother if the lender has worked with the contractor before, as the lender will be familiar with the contractor’s work and documentation, and the contractor is familiar with the lender’s requirements. If you are purchasing a new property with the intention of installing an ADU, if at all possible, we recommend negotiating an extended due diligence period of 75-90 days to research the feasibility of the ADU, consider any site requirements, and report your ADU plan to the lender so they can order an appraisal of the property based on its estimated future value with the ADU.

Frequently Asked Questions

Have an ADU Project in Mind? Reach Out Today To Start The Conversation!

Schedule a Free Consultation