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

Building an ADU is a significant investment, but several financing paths can make it achievable. Understanding your options early helps you plan a realistic budget and timeline.

Home equity loans and HELOCs let you borrow against your existing home equity at competitive rates — a popular choice for homeowners who have built up value in their property.

Construction loans provide short-term financing during the build, then convert to a standard mortgage upon completion. They're well-suited to ground-up detached ADUs where costs are spread across the construction timeline.

A cash-out refinance replaces your current mortgage with a larger one, giving you access to equity for construction while potentially locking in a new rate.

Finally, some lenders now offer ADU-specific loan products designed around the unique value and income potential of accessory units. Pairing the right financing with a clear ROI projection — including expected rent and break-even timeline — turns an ADU from an expense into a long-term asset.