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ADU Financing Calculator
Compare HELOC, cash-out refinance, construction loan, and ADU-specific financing. See your monthly payment, total interest, and net cash flow after rent.
Pre-filled with typical California rates. Adjust to match your actual terms.
ADU Financing Options Compared
Each financing type has trade-offs. Here is a plain-English comparison to help you decide which fits your situation.
HELOC
7.5–9.5%Best for: Homeowners with significant equity who want flexibility
+ Draw only what you need, interest-only payments during draw period
- Variable rate, risk if rates rise, reduces available equity
Cash-Out Refinance
6.5–7.5%Best for: Owners who can refinance at a rate close to their current mortgage
+ Fixed rate, single payment, potentially lowers blended rate
- Resets mortgage term, closing costs, not worth it if current rate is low
Construction Loan
7–9%Best for: New builds where you need staged funding as construction progresses
+ Funds disbursed in draws aligned with construction milestones
- Short-term loan, converts to permanent mortgage after completion
ADU-Specific / CalHFA
5.5–7%Best for: Lower-income eligible homeowners and first-time ADU builders
+ Lower rates, potential grants up to $40,000, purpose-built for ADUs
- Income and eligibility limits apply, availability varies
ADU Financing Questions Answered
What is the best way to finance an ADU in California?
The most common ADU financing options in California are: (1) HELOC — draw against your home equity at variable rates, good if you have significant equity; (2) Cash-out refinance — replace your mortgage and extract equity, best when refinancing at a lower rate; (3) Construction loan — dedicated build financing, converts to a permanent mortgage after completion; (4) ADU-specific programs — CalHFA offers grants up to $40,000 for eligible lower-income homeowners.
Can I get a loan specifically for an ADU?
Yes. Several programs exist: the CalHFA ADU Grant Program (up to $40,000 for eligible lower-income owners), Fannie Mae HomeStyle Renovation loans, and various local ADU financing programs through cities and counties. Some credit unions and community banks also offer dedicated ADU construction products.
How much equity do I need to finance an ADU with a HELOC?
Most lenders require you to maintain at least 20% equity in your home after the HELOC draw. If your home is worth $800,000 and you owe $400,000, you have $400,000 in equity. A lender might allow you to borrow up to $240,000 (keeping $160,000 / 20% untouched). Check with multiple lenders for current terms.
Will building an ADU affect my existing mortgage?
A HELOC or construction loan does not affect your existing first mortgage. A cash-out refinance replaces it entirely. Adding an ADU does not trigger a due-on-sale clause. Your property taxes will increase when the ADU is added to the tax roll, but typically by only a modest amount reflecting the ADU's assessed value.
What is the CalHFA ADU Grant Program?
The California Housing Finance Agency (CalHFA) offers grants of up to $40,000 to eligible lower-income homeowners to cover pre-development and non-recurring closing costs for ADU construction. The grant does not need to be repaid as long as the home is owner-occupied for at least 5 years. Check CalHFA.ca.gov for current income limits and availability.
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