Financing ADUs
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New recent changes with ADU ordinances increases the opportunity for homeowners to add an ADU/Granny Flat. This is a unique opportunity to create affordable housing for a loved one or start your realty income stream.
Most homeowners will qualify to finance an ADU. Several financing options are available. One popular option is refinancing your current loan and pulling out equity to finance your ADU. ADU budgets can start out at $80,000 but most will range in $200,000 to $300,000.
Not all homeowners will have sufficient equity for an ADU, then you can consider renovation loans from HUD & Fannie Mae. The key advantage is these loans are based on the future value of the property. Anytime a renovation adds square footage, it's highly valued and appraised.
Other loans are also available that can be considered: constructions loans, jumbo loans & hard money loans.
Most homeowners will qualify to finance an ADU. Several financing options are available. One popular option is refinancing your current loan and pulling out equity to finance your ADU. ADU budgets can start out at $80,000 but most will range in $200,000 to $300,000.
Not all homeowners will have sufficient equity for an ADU, then you can consider renovation loans from HUD & Fannie Mae. The key advantage is these loans are based on the future value of the property. Anytime a renovation adds square footage, it's highly valued and appraised.
Other loans are also available that can be considered: constructions loans, jumbo loans & hard money loans.
Which is the best loan for you? The following is a brief guide.
Cash-out Refinance - Refinance loan your current home loan. The equity will provide cash for your construction costs. The loan will release between 80 - 90% of your equity. This will have a lower interest rate compared to other current home loans for renovations.
HELOC - Home Equity Line of Credit - Allows to take out a supplemental loan based on the equity available. It appears similar to a credit card. You can payment can vary. Your interest rate can also vary.
This will have preference when you current loan will well below current interest rates.
Renovation Loan - These loans are funded and insured by HUD and Fannie Mae. Available for purchase or refinance. Allows to add construction costs to a home loan. Construction costs is based on future value determined in an appraisal. This is preferred when you need a larger construction budget.
Construction - Usually setup for new construction or major renovations. Construction costs are paid to contractor in completed phases known as draws. Two options exists: Construction to permanent or construction only. One advantage is its interest-only during construction.
Hard Money Loan - These are short-term loans that carry high interest rates. Loan is determined on value of the property. This is a fast turnaround need for renovations. This is used by investor flippers to renovate a purchased property and then immediately put back on the market for sale.
Jumbo Loan - Is available for high balance home loans over conventional loan limits (currently $690,000).
Cash-out Refinance - Refinance loan your current home loan. The equity will provide cash for your construction costs. The loan will release between 80 - 90% of your equity. This will have a lower interest rate compared to other current home loans for renovations.
HELOC - Home Equity Line of Credit - Allows to take out a supplemental loan based on the equity available. It appears similar to a credit card. You can payment can vary. Your interest rate can also vary.
This will have preference when you current loan will well below current interest rates.
Renovation Loan - These loans are funded and insured by HUD and Fannie Mae. Available for purchase or refinance. Allows to add construction costs to a home loan. Construction costs is based on future value determined in an appraisal. This is preferred when you need a larger construction budget.
Construction - Usually setup for new construction or major renovations. Construction costs are paid to contractor in completed phases known as draws. Two options exists: Construction to permanent or construction only. One advantage is its interest-only during construction.
Hard Money Loan - These are short-term loans that carry high interest rates. Loan is determined on value of the property. This is a fast turnaround need for renovations. This is used by investor flippers to renovate a purchased property and then immediately put back on the market for sale.
Jumbo Loan - Is available for high balance home loans over conventional loan limits (currently $690,000).
We can Help
Let us help you work through all the considerations. Let's get Started - So invest a moment to explore the possibility. Complete the brief worksheet. It's not a loan application. No FICO score. We'll review and schedule a phone call to narrow your choices and determine your next steps.
Let us help you work through all the considerations. Let's get Started - So invest a moment to explore the possibility. Complete the brief worksheet. It's not a loan application. No FICO score. We'll review and schedule a phone call to narrow your choices and determine your next steps.
SD203K.com is operated by Inspection Perfection, a home inspection company serving the greater San Diego area since 2005. Owner, Will Johnson is a certified 203K HUD consultant since 2008.
For more information on Inspection Perfection, please visit us at:
www.sdinspection.com
For more information on Inspection Perfection, please visit us at:
www.sdinspection.com