Financing Your ADU Project: A Guide to Loans and Funding Options

Most homeowners fund an ADU with some form of borrowing. Here's how the common options compare.

Home equity loan or HELOC

If you've built up equity, borrowing against it often brings lower rates than unsecured loans.

Construction loan

These short-term loans release funds as work progresses, then convert to a standard mortgage when the unit is complete.

Cash-out refinance

Replacing your mortgage with a larger one frees up cash — worth it mainly when current rates are favorable.

ADU-focused programs

Some lenders and housing programs offer products designed for ADUs, occasionally counting future rent toward qualification. Ask local lenders what's available.