Homeowners without sufficient equity in their properties to pay for the cost of building an ADU may qualify for a first or second mortgage that incorporates some or all of the value of the ADU in calculating the equity in a property. Because a typical appraisal won’t include the full value of a to-be-built ADU, these loans can finance the cost of building an ADU only if the property has existing equity and the required contribution of value from the ADU represents less than 50% of the cost of the project.

Dweller can provide recommendations for lenders with experience providing financing that incorporates the potential value of the ADU in the loan amount. As with traditional home equity loan options, homeowners should consider a variety of factors, including interest rate and repayment schedule, when choosing among loan options.