Accessory Dwelling Units (ADUs) have become a popular way to add living space, increase property value, and generate rental income. But while building an ADU is a smart investment, it often comes with a steep upfront cost. That’s where our free ADU Loan Calculator comes in. This easy-to-use tool helps you estimate how much you can borrow, compare different financing options, and get a clearer picture of what your monthly payments might look like—all without the guesswork.
ADU Loan Calculator
Want to calculate the cost? Try the ADU CostCalculator
How This ADU Loan Calculator Works
Our ADU Loan Calculator is designed for homeowners who want to explore financing options before reaching out to a lender. By inputting your home’s current value, remaining mortgage balance, estimated ADU construction cost, credit score range, and preferred loan term, the calculator generates:
- Your estimated home equity
- The maximum loan amount you might qualify for (based on 80% loan-to-value)
- Monthly payment estimates for different loan types
Note: This calculator is for estimation only and does not constitute a loan offer.
The goal is to empower you with actionable insights before you start the financing process. It’s especially useful if you’re unsure whether to go with a construction loan, HELOC, or refinance.
ADU Financing Options Explained
Not all loans are created equal. Depending on your financial situation and the type of ADU you plan to build, one loan type may be more suitable than another. Here’s a breakdown of common financing options:
1. Construction Loan
A construction loan is a short-term, high-interest loan used specifically for building projects.
- Best for: New ADU builds or major renovations
- Terms: Typically 12 to 24 months
- Pros: Funds are distributed in phases as work progresses; tailored for large projects
- Cons: Higher interest rates; often requires conversion to a permanent loan after construction
2. HELOC (Home Equity Line of Credit)
A HELOC allows you to borrow against your home equity and draw funds as needed.
- Best for: Flexible budgets or phased construction
- Terms: 10-year draw period, 15–20 year repayment period
- Pros: Only pay interest on what you use; flexible repayment
- Cons: Variable interest rates; risk of foreclosure if unpaid
3. Cash-Out Refinance
This option replaces your current mortgage with a new, larger one—the difference being the cash you take out.
- Best for: Low existing mortgage rates or those needing large loan amounts
- Terms: 15 to 30 years
- Pros: Potential for lower interest rate; single loan payment
- Cons: Extends your mortgage; closing costs involved
4. Personal Loan
A personal loan is an unsecured loan you can use for any purpose, including ADU construction.
- Best for: Small ADUs or finishing touches
- Terms: 2 to 7 years
- Pros: No collateral required; fast approval
- Cons: Higher interest rates; limited amount
How Much Can You Borrow?
The amount you can borrow is primarily based on your available home equity. Here’s the general formula:
Home Equity = Home Value – Remaining Mortgage
Lenders typically allow you to borrow up to 80% of your home’s value, minus your mortgage. For example:
- Home Value: $600,000
- Remaining Mortgage: $300,000
- Max Borrowable: 80% of $600K = $480K → $480K – $300K = $180,000
That $180K represents your potential borrowing power—more than enough for many ADU projects.
Our calculator runs these calculations for you and shows how different financing types affect your monthly payment based on your credit score and term.
Monthly Payment Comparison
Let’s say your estimated loan amount is $150,000, and you want to repay it over 25 years. Here’s how your monthly payments might look based on your credit score:
| Credit Score | Interest Rate | Monthly Payment (Est.) |
|---|---|---|
| Excellent | 6.5% | $1,014 |
| Good | 7.5% | $1,109 |
| Fair | 8.5% | $1,208 |
| Poor | 10.5% | $1,419 |
These estimates are meant to guide you, not guarantee any rate. Lender terms vary, but this helps you set realistic expectations.
How to Use This Calculator
- Enter your home’s estimated market value.
- Input your current mortgage balance.
- Add your estimated ADU cost (or use a cost calculator if unsure).
- Select your credit score range.
- Choose your desired loan term.
- Click “Calculate” to see available loan amount and monthly payment estimates.
Use the results to compare financing strategies and decide what works best for your budget.
Tips to Qualify for the Best ADU Loan
Getting approved for the right ADU loan depends on a few key factors:
- Maintain a good credit score (ideally 700+)
- Lower your debt-to-income ratio (aim for under 43%)
- Have detailed construction plans and a budget
- Work with a lender familiar with ADUs
- Include projected rental income if you plan to lease the ADU
These steps can increase your chances of approval and improve your loan terms.
Frequently Asked Questions (FAQs)
Q: How accurate is the ADU loan calculator?
A: It provides rough estimates based on average market conditions. For exact terms, consult a lender.
Q: What is the minimum credit score for an ADU loan?
A: Most lenders require at least 620, though higher scores unlock better rates.
Q: Can I use a HELOC to build an ADU?
A: Yes. HELOCs are popular for phased or DIY ADU builds.
Q: Is a cash-out refinance better than a construction loan?
A: It depends on your current mortgage rate and how much you need to borrow.
Q: What does an ADU typically cost to build?
A: Costs range from $100K to $300K+, depending on size, design, and location.
Q: Do I need permits before applying for a loan?
A: Not always, but lenders may require a clear plan and timeline for construction.
Start Planning Your ADU Today
Financing your ADU doesn’t have to be confusing. With the right tools and information, you can build smarter, not just bigger. Use our ADU Loan Calculator to explore your options, understand your borrowing potential, and compare loan types without filling out lengthy forms or talking to salespeople.
Need help estimating your ADU cost? Try our ADU Cost Calculator to get a realistic project budget.
