Financing
Financing your ADU project
Whether you're adding a backyard ADU to your own home or new units to a multifamily property, there's usually a financing path that fits. Here are the routes owners, investors, and developers most often use, and where we can help connect the dots.
For single-family homeowners
Construction & renovation loans
Fund a new ADU or garage conversion with a construction or renovation loan that draws in stages as the work progresses, then converts to a standard mortgage once the project is finished, often without re-qualifying. Draws are tied to project milestones as construction moves forward.
Home equity line of credit (HELOC)
Borrow against the equity you already have as a revolving line, drawing what you need as the project moves and paying interest only on the balance you've used. It's often the quickest equity option to set up, with a rate that tracks the market.
Cash-out refinance
Refinance your existing mortgage for more than you currently owe and take the difference in cash to fund the ADU. It replaces your current loan with a new one, so it tends to make the most sense when today's rates and your equity line up in your favor.
Home equity investment
Some owners tap equity through a home equity investment, a shared-equity agreement, to fund an ADU without adding a monthly payment, repaying it later through a refinance, a sale, or other funds. It isn't right for everyone, but for the right owner it keeps monthly cash flow clear during the build.
For multifamily owners, investors & developers
Financing that counts the new rental income
Adding detached ADUs or converting non-livable space into units increases what a property earns. Many lenders who work with multifamily owners and investors will factor that projected rental income into the loan itself, similar to how a commercial or value-add refinance is underwritten.
Portfolio & investment-property lending
Multifamily owners and small developers often already work with a portfolio lender or commercial bank comfortable underwriting a densification project as part of a broader refinance, acquisition, or value-add strategy.
ADU-specific programs
Grants and dedicated ADU programs
California has previously offered dedicated ADU financing help, including a CalHFA grant of up to $40,000 toward pre-development and construction costs. Funding for that program has been exhausted as of this writing. Program availability changes, so ask us about current state and local options when we talk about your project.
ADU Concepts is a licensed general contractor, not a lender or financial advisor. This page is general information, not financial advice. Confirm terms, rates, and eligibility with a licensed lender or financial advisor for your specific situation.
FAQ
ADU financing questions
How do I finance a backyard ADU?
Most single-family homeowners fund a new ADU or garage conversion with a construction or renovation loan that converts to a standard mortgage once the work is complete, or by tapping existing equity through a HELOC or a cash-out refinance. The right path depends on your equity, timeline, and whether the ADU is for family use or rental income.
Can I finance an ADU using the rental income it will generate?
Often, yes, especially on multifamily properties. Adding detached ADUs or converting non-livable space increases what a property earns, and many lenders who work with multifamily owners and investors will factor that projected rental income into the loan, similar to a commercial or value-add refinance.
Is the $40,000 CalHFA ADU grant still available?
Not currently. CalHFA has previously offered a grant of up to $40,000 toward ADU pre-development and construction costs, but that funding has been exhausted as of this writing. Program availability changes, so ask us about current state and local options when we talk about your project.
Does ADU Concepts provide financing or lending?
No. ADU Concepts is a licensed general contractor, not a lender or financial advisor. We help you understand which financing paths typically apply to a project like yours and can point you toward lenders who work with ADUs, but you confirm terms, rates, and eligibility with a licensed lender.
Want help mapping the numbers?
Tell us about your property and your goals, we'll walk you through the financing paths that actually apply to your project.