More and more property buyers and Real Estate Investors want to find and buy a property where they can add an Accessory Dwelling Unit (ADU).  An ADU is a secondary dwelling unit with complete independent living facilities for one or more persons.  ADU’s generally include:

  1. Detached: The unit is separated from the primary structure
  2. Attached: The unit is attached to the primary structure
  3. Repurposed Existing Space: Space within the primary residence is converted into an independent living unit. Junior Accessory Dwelling Units (JADU’s) fit into this category as JADU’s are 500 square feet or less and must be completely contained within the space of an existing structure.

There are many reasons for adding an ADU to a residential property including:

  • Supplement rental income
  • Increase property value
  • Provide a space for extended family

Several bills have been passed in California in recent years to make it easier for California homeowners to add ADU’s to their property, and the trend is continuing.  In fact, recent legislation facilitates, not just ADU’s but additional units (think tri-plex vs. SFR) and lot splits as additional ways to add density to California’s housing stock.  Many kinds of loans are available to finance the construction of an Accessory Dwelling Unit (ADU) even when remaining Owner Occupied.  The table below will provide a brief overview into financing for ADU’s and discuss’ a few loan scenarios and loan types.

Types of ADU Purchase/Refinance Scenarios and associated Loan Types:

Loan Scenario Loan Type
Buy a house and rehab the main house and build an ADU and then sell the entire property Business Purpose Fix and Flip Purchase loan with funds provided for the Rehab.  Typically, 80% of the Purchase Price and 80% of the Rehab Amounts are provided in the loan
Buy an SFR/Duplex/Triplex as an investment, and add ADU/ADU’s for rental purposes Business Purpose Fix and Rent Loan at Max. 70% – 80% LTV on purchase and or 65% of the After Repair Value (ARV)
Add additional ADU/ADU’s to existing Owner Occupied SFR/Duplex/Triplex A Business Purpose Cash Out loan works for this loan scenario.  An existing owner could qualify for either a new 1st Trust Deed or 2nd lien position loan which would leave the existing 1st Trust Deed in place.  If SFR, and replacing the 1st TD, the loan amount should exceed 2x of the current 1st.
Add additional ADU/ADU’s to an existing Non-Owner Occupied SFR/Duplex/Triplex A Business Purpose Cash Out loan in 1st or 2nd position works for this loan scenario.
Owner Occupant wants to build an ADU and have the ADU occupied by a family member Typically, a Home Equity Line of Credit (HELOC) in 2nd lien position would fit for this consumer loan scenario


Mortgage Vintage, Inc. quickly and professionally funds ADU construction loans for Owner and Non-Owner-Occupied properties throughout California,