Common ways to pay for an ADU
- Cash or savings. Simplest, with no interest and no lender schedule.
- Home equity line of credit (HELOC). Borrow against existing equity and draw as construction progresses. Rates are usually variable.
- Home equity loan. A lump sum at a fixed rate, based on existing equity.
- Cash-out refinance. Replace your mortgage with a larger one. Worth comparing carefully if your current rate is low.
- Renovation or construction loans. Some loans lend against the value your home will have after the project is finished, which can help when equity is thin. Ask lenders specifically whether they finance detached ADUs.
- Contractor financing. Park Atlanta Construction lists a financing option on its website through a third-party lending marketplace.
Questions to ask a lender
- Do you lend on detached ADUs, and do you use the finished value?
- How are funds released during construction (draws, inspections)?
- Can projected rental income from the ADU count toward qualifying?
- What appraisal approach do you use for homes with ADUs in my area?
- What are the closing costs and any prepayment penalties?
Plan the budget before you borrow
Lenders want a detailed budget and a signed contract. Use the cost guide and calculator to frame your range, then get a real number for your lot. This page is general information, not financial advice; talk to a lender or financial adviser about your situation.