Category:
Accessory Dwelling Units (ADU)
There are several ways to finance a granny flat, also known as an Accessory Dwelling Unit (ADU), in California:
- Home Equity Loan or Line of Credit (HELOC): If you have built up significant equity in your home, you may be able to use a home equity loan or a home equity line of credit to finance the construction of an ADU. These types of loans use your home as collateral and allow you to borrow a lump sum of money that you repay over a fixed period of time.
- Cash-Out Refinance: This involves refinancing your mortgage and taking out a larger loan than what you owe on your home. The difference between the new loan and the amount you owe on your home is given to you in cash, which you can use to finance your ADU.
- Construction Loan: These are short-term loans that cover the cost of construction. Once the ADU is built, you would typically refinance this into a more traditional mortgage.
- Personal Loan: If the cost of the ADU is not very high, or if you have excellent credit and a high income, you may be able to cover the cost with a personal loan.
- Savings: If you have significant savings, you may be able to finance the ADU without borrowing.
- Government Programs and Incentives: Some local and state governments offer financial incentives, such as low-interest loans or grants, for homeowners who build ADUs. Be sure to research whether any such programs are available in your area.
- Renovation Mortgage: Some lenders offer renovation mortgages, which allow you to finance both the purchase of a home and the cost of improvements, like an ADU, in a single loan.
It’s important to note that all of these options involve varying degrees of risk and cost. You should carefully consider your own financial situation and consult with a financial advisor or mortgage professional before deciding on the best way to finance an ADU.
