Compare HELOC, cash-out refinance, construction loan, and RenoFi options for funding your Los Angeles ADU project. Estimate your monthly payment in seconds - no signup, no credit pull.
Estimated Monthly Payment
$2,217
on a $225,000 loan
Estimate only - actual loan terms depend on credit, lender, property value, and current market rates.
Each loan type has a different rate range, term, and best-fit borrower. Use this guide to figure out which one to actually apply for.
8.0% – 10.5%
Variable · 10–15 yr
Best for: homeowners with strong equity who want flexibility and plan to refinance after the build.
6.5% – 7.5%
Fixed · 30 yr
Best for: homeowners with a current rate above 7% who want fixed payments and 30-year term.
9.0% – 12.0%
12 mo construction · then perm
Best for: detached new-build ADUs over $250k where the lender needs draw control.
6.5% – 8.5%
Fixed · 20 yr
Best for: homeowners with limited current equity who want to leverage the ADU's added value.
Building an ADU in Los Angeles costs anywhere from $150,000 to $500,000 depending on size, type, and finish level. Almost nobody pays cash. The four financing paths above each work for a specific situation - the trick is matching the loan to your equity position, timeline, and risk tolerance.
If you have 20%+ equity in your primary residence, this is the cheapest path. A HELOC gives you flexibility and a fast close but variable rates. A cash-out refi locks in a fixed rate but resets your mortgage. Most LA homeowners who've owned for 5+ years have enough equity to fund a $200k–$300k ADU this way.
For larger detached builds ($300k+) or homeowners with thin equity, an ADU construction loan releases funds in milestone draws (foundation, framing, drywall, final). The lender controls the build budget. Rates run 9–12% during construction, then convert to a 30-year permanent loan after completion at lower rates.
A handful of niche lenders underwrite ADU loans on the home's value after the ADU is built, not before. That dramatically increases borrowing power for homeowners who would otherwise be priced out. Trade-off: tighter underwriting and detailed final plans required upfront.
Roughly 1 in 5 of our LA clients pay cash. If you have the liquidity, you skip closing costs and interest entirely - but you also lose the tax-deductibility of mortgage interest and tie up capital that could be earning elsewhere.
The math that makes ADUs work: a detached ADU in LA typically rents for $2,200–$3,500 per month. On a 15-year HELOC at 8.5%, financing $225,000 costs about $2,217/month - meaning the tenant's rent comes close to covering the loan payment. Run your own numbers with our Tenant Pays the Mortgage tool.
Most lenders will let you borrow up to 80–85% of your home's current value (or after-completed value with a RenoFi-style loan), minus your existing mortgage balance. In LA where median home values are $900k–$1.4M, that typically translates to $200k–$500k of available financing - enough to fully fund most ADU projects.
HELOCs and cash-out refis typically require a 680+ FICO. ADU-specific construction loans and RenoFi-type products often require 700+. Lower scores aren't automatic disqualifiers but mean higher rates and tighter loan-to-value ratios.
Yes, for some loan types. ADU-specific lenders and construction loans often allow 75% of projected market rent to be added to your qualifying income. Standard cash-out refis and HELOCs generally do not count future ADU rent during underwriting.
Mortgage interest deducted on a cash-out refi or HELOC used for "substantial home improvements" (including ADU construction) is generally deductible up to the IRS mortgage interest cap. Consult a CPA for your specific situation - rules vary based on how the loan is structured.
HELOC: 2–4 weeks. Cash-out refinance: 4–6 weeks. Construction loan: 6–10 weeks (requires detailed budget + plans). RenoFi: 4–8 weeks. Build start can happen as soon as funding clears and permits are pulled.
Yes. Get pre-qualified for financing before you commit to plans - it sets a hard budget cap and prevents the painful situation of designing a $350k ADU and discovering you can only finance $250k. Most lenders give you a free pre-qual in under an hour.
We're a licensed contractor, not a lender - but we have relationships with several ADU-focused lenders and can point you to options that fit your situation. Talk to us and we'll connect you.
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