With a traditional HELOC, there’s a maximum amount available for you to borrow — the line of credit, which you can use for up to 10 years. Homeowners typically tap into their HELOC for immediate needs to pay off high-interest debt, medical expenses or home improvement projects. It can also serve as a safety net during emergencies. Having the line available at any time offers security, comfort and flexibility. With an ADU HELOC, the term is much shorter with a 2-year draw, followed by a 20-year repayment period. The line can only be used for construction purposes such as a home renovation, remodel or addition (ADU). If you need help identifying which type of HELOC is right for you, reach out to a Home Loan Consultant.

In most cases, we can offer financing for up to 125% of your home’s current value – which includes your first mortgage (if any) and your new ADU HELOC. For example, if your property is worth $800,000 and you owe $600,000 on your first mortgage, you may be eligible for an ADU HELOC up to $400,000. ($800,000 x 125% = $1,000,000. $1,000,000 – $600,000 = $400,000.) Keep in mind, this depends on several other factors such as your loan approval, credit history and income. We recommend connecting with one of our Home Loan Consultants who specializes in renovations and ADUs.

Yes. There will be closing costs that range based on your loan amount, along with a lender fee of $250. We will also partner with a construction management vendor and there will be fees paid to them at closing. There is also a monthly fee of $50 for lines up to $100,000 or $100 for lines greater than 100,000, which is charged until the project is completed. We can help you estimate your closing costs.

ADUs have been known by many names: granny flats, backyard cottages, in-law units, secondary units and more. An ADU (accessory dwelling unit) has its own kitchen, bedroom and bathroom facilities. It can either be attached or detached from the primary residence. ADUs are meant to be an accessory to the main house and are usually smaller in size (and may have specific size limitations set by each city) and located behind or to the side of the primary home.

If you own a home in California, you are permitted to build at least one ADU or Junior ADU (500 square feet max and attached to the primary residence) if your house falls within a residential or mixed-use zone. Additionally, to help with the housing shortage, ADU laws and regulations have eased over the years and many cities have streamlined their processes to make it easier and more affordable. If you’re considering building an ADU and need financing, speak to one of our Home Loan Consultants to see what type of loan may be right for you.

There are many! ADUs do not require additional land, are often very cost-effective, provide passive rental income and increase the overall value of your home. They also give homeowners the flexibility to share independent living areas with family members, by helping aging parents stay close by as they require more care, or provide a private space for adult children to live and rent.

Yes – the entire financing process for an ADU HELOC will take more time than a traditional HELOC. This is mainly due to the complex nature and paperwork required for construction, building permits, inspections and more. It’s best to have a conversation with one of our Home Loan Consultants about your project first. They can help you determine if an ADU HELOC is right for you and will then refer you to one of our construction management partners to proceed with an application. Each project is unique and we’re here to help.