If you’re planning on building an accessory dwelling unit (ADU), whether as a low-cost housing for senior family members or a temporary living accommodation for out-of-town guests, there’s a good chance that you’re looking for means to finance it. The average cost of an ADU can come anywhere from $100,000 and $300,000, and finding a way to finance it can be confusing. To help you get started, Bay Valley Contractors, a commercial roofing and home remodeling company, talks about different financing options below.
Cash-Out Refinancing
This financing option allows you to refinance your mortgage, providing a lump-sum payment that will be repaid over time with your monthly payments. Cash-out refinancing is particularly attractive to residential owners who would like to get a lower rate or consolidate their new expenses into an existing home loan.
Personal Line of Credit
If you don’t have enough equity to qualify for a loan, a personal line of credit can be an excellent option. These lines of credit are not as large as those available with cash-out refinance, and the interest rates are generally higher, but it can make financing an ADU more accessible.
Construction Loan
In some instances, a renovation or construction loan is a convenient system to carry out the addition, especially for homeowners who don’t have sufficient equity in their home to qualify for other financing options. Not all banks offer construction loans, so make sure to do proper research before moving forward.
Local Government Grant
Dwelling units constructed for specific purposes can qualify for a local government grant. In California, for example, programs designed to help house the homeless provide loans for ADU construction. To find out if a government program can help you fund your ADU, get in touch with local housing authorities.
Cash
If you have cash or other assets that can be liquidated, it may be worth investing in an ADU, specifically if you’re planning on renting it out. It’s wise to spend your money on upfront costs like design, feasibility and permitting fees.
You can count on Bay Valley Contractors for high-quality exterior improvement services, including gutter installation and room additions. Your new and improved home is within your reach, and our certified team is standing by to partner with you. Just give us a call at (925) 718-0780, or complete our online form to schedule an appointment.