How to finance an ADU? How other people pay for ADU?
We could mention a bunch of ways for ADU financing: which one you use – depends on you, your situation, your accountant and financial advisor. There is no one answer that fits all.
Take your pick between any one or any combination of cash and credit cards, cash-out refinance and home equity line of credit (a.k.a. HELOC), construction or renovation loan, borrowing from a retirement account or from friends and family, reverse mortgage loan or shared equity financing. The list goes on. There is even an option to get structured funding from an investor, or even friends and family though a Rent Sharing Loan.
We know, the companies on this page assist homeowners with ADU projects. Each has a different approach to financing. Figure out what works best for you depending on your personal situation, equity in the main house and monthly cashflow. Or consult a mortgage broker to assist you. Most importantly, shop around. Interest rates and closing costs differ.
Below are some options that may help you – provided for educational purposes, we are not receiving any commissions from these companies.
Smart Loan Depot product
Skip the paper-chase by digitally connecting your income, employment and assets. Quickly determine the loan options that will give you the greatest potential cost- and/or time-savings. Loan Depot expert loan consultants can then assist you in making the best decision for your personal financial situation. And you can estimate costs online.
Let Unison Co-invest
With a home co-investment from Unison, you get cash today in exchange for a share in the appreciation or depreciation of your home. Don’t think loan. There’s no extra debt, no interest and no monthly payments. Make sure you fully understand the costs of shared appreciation.
Investor can participate in financing your ADU
HomeBrik Rent-Sharing Loan is a 1 to 2-year investment loan that can subsequently be repaid in ~15 years from rental income. No loan conversion is required. During the repayment phase, Rent-Sharing Loan closely resembles a 15-years fixed loan. (Disclosure: our parent company HomeWiP is affiliated with this provider.)
Point, a home equity partner
Point pays you today for a share of your home’s future appreciation. There are no monthly payments. There is no interest rate; you can buy Point out or sell the home at any time. Point can event lose money if the home depreciates.
Partner in Bridge Loans
Partner with LendingHome for a solution that’s tailored to your real estate investing goals.
Advocate for Affordable Housing
Check Housing Trust Silicon Valley Homeowner Assistance Program that, when it opens, will help you build an ADU and assist the Bay Area in fighting the housing crisis.
As a mission driven lender, they have a two year affordability restriction. Your tenant’s income has to be less than 120% of the Area Medium Income. The rent should not be more than 30% of the income and the rent is capped at a certain number.
However, they do offer up to $200,000 to cover both soft and hard construction costs.
Opt for a Financial Advisor
Since market conditions and mortgage programs change frequently, you need to make sure you’re dealing with a top professional who is able to give you quick and accurate financial advice.
Need partial funding?
With SoFi, you can finance any home project without having to put your home on the line. A low-rate, unsecured loan from SoFi for up to $100,000 can help you get it done.
Have we missed a financing resource? Let us know, and we will add them to the list.