Complete Guide to ADU Financing: How to Fund Construction of your Accessory Dwelling Unit

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Before we talk, here are some questions to think about:
-What is the current value of your home?
-What is the balance on your current mortgage?
-What is the current interest rate on your mortgage?
-What is your ADU project going to cost?
-Do you have any cash you can put toward the project or do you need to finance the entire cost?
-What do you anticipate your home will be worth once your ADU is built?
-How much mortgage payment can you afford after your ADU is built?

In this video:
Looking for financing for an ADU? Start here! It’s a long video, but there’s a lot to cover! I’ve condensed decades of experience financing ADUs into a simple framework I’m excited to share with you. I cover all of the financing options available, how each works, pros and cons and some practical advice. Hundreds of my clients have built their ADUs and you can too!

00:00 - Intro: ADUs are magic
00:27 - Why build an ADU?
00:55 - Financing: the puzzle
01:50 - Types of ADU financing
02:58 - Category #1: Outside Funds
03:52 - Retirement funds
05:33 - Retirement distributions
06:41 - Outside the box options with retirement funds
07:28 - Don’t forget family & friends
08:09 - Credit cards
10:20 - Category #2: Equity you have
10:50 - Refinancing
11:55 - Why refinancing is good
12:34 - Why refinancing may not be good
13:26 - Reverse mortgages
14:40 - Home Equity Lines of Credit
15:17 - What’s different about a HELOC?
16:38 - Why a HELOC is good
19:15 - Why a HELOC may not be good
21:31 - Home Equity Loans
22:26 - Hybrid HELOC / HELoan
22:55 - What is a blended rate?
24:51 - Category #3: Equity you create
25:29 - Construction loans
26:31 - Lender gettin’ all up in your business
26:57 - Construction loan timing
27:25 - Construction documents
28:32 - Construction loan appraisal process
29:40 - Contractors for construction loans
30:03 - Warning: don’t start work too soon!
30:56 - Construction loan vs refinance
31:57 - What about prefab ADUs
33:24 - Purchase with construction loan
34:35 - Renovation loans
35:05 - FHA 203(k) Renovation Loan
37:28 - Fannie Mae & Freddie Mac renovation loans
38:36 - How do the Fannie & Freddie reno loans work?
40:04 - Contractor review / HUD consultant
40:55 - Renovation loan timelines
41:24 - Payments start right after closing
41:59 - The draw process
42:44 - Interest rates on reno loans
43:09 - Renovation loans are faster to close
43:45 - We need to talk about appraisals!
45:14 - Comps, comps, my kingdom for a comp!

#adu #adus #adufinance #adufunding #buildanadu

Julee Felsman, NMLS 120831
Guaranteed Rate, Inc.; NMLS 2611 Equal Housing Lender.

Branch address: 1300 SE Stark St 111, Portland, OR 97214
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Information provided is for educational purposes only. It should not be construed as financial or legal advice or instruction. Guaranteed Rate does not guarantee or assume liability for the accuracy, completeness, or timelines of the information. You should conduct additional research before making any mortgage related decisions. By refinancing, you may pay more in costs and interest over the extended term. Guaranteed Rate, Inc. cannot predict where rates will be in the future.Guaranteed Rate has no affiliation with the US Department of Housing and Urban Development. By refinancing, you may pay more in costs and interest over the extended term.Sample rate provided for illustration purposes only and is not intended to provide mortgage or other financial advice specific to the circumstances of any individual and should not be relied upon in that regard. Guaranteed Rate, Inc. cannot predict where rates will be in the future.

[workshopmortgage]

I recorded this video with finding funding sources for an ADU in mind, it's relevant to any major remodeling project you may want to undertake. I hope you find this video helpful, but if I left any questions unanswered comment or reach out. My contact information is in the description. 😊

[tammytran]

Your insights were invaluable, and I appreciate the effort you put into sharing such useful information. I'm hopeful that you'll consider making more ADU financing videos in the future. Keep up the fantastic work!

[dinaosona]

I just had a conversation with Julee Felsman and she was so helpful. Thank you Julee!!

[franklincarreno]

Oh my goodness, I have watched this video 4 times and I can’t stop thinking about it. A gem, thanks for sharing this important knowledge with us. ❤

[deliyla]

🎉 you are terrific! You have given me so much valuable information. I wish you were in Florida to meet with you.

[gilgomez]

Excellent presentation and content! Thank you so much; I’ve subscribed to your channel.
As an aging senior, an In-law suite (for me) or an ADU (for me) on my son’s future house/property is the plan. This has clarified a lot of my finance questions to mull over and I’m definitely sharing this video with him.
I’m very blessed in that he wants me close or with him and it makes sense so he isn’t worried about my safety.
Thank you!

[tanishajacobs]

WOW! I just came across your channel, and I really appreciate how you explain things. I have never come across a channel that provides such detail in a manner that is easy to understand. You are amazing!

[michmack]

This was incredibly informative and detailed- a hidden gem on YouTube!!

[MAJRCustardPi]

What a great resource -- thank you Julee! I have been researching ADUs for three years now through subscriptions to various YouTube channels and my own follow up research and reading and I am growing my knowledge base. I am subscribing to your channel and look forward to more invaluable information and helpful advice. So far I've only found one YouTube channel pertaining specifically to ADU-ing in California's Central Valley (I'm in Fresno) but I'm gaining a lot of knowledge about ADU-ing in general and your contributions are very much appreciated.

[adusnmore]

I’m glad I found you I didn’t know you had a channel. I met you at the San Diego ADU academy. Your ADU information was so helpful and right on time. Getting ready to start my own ADU for me to live in at a family member’s house. Thanks for the information.

[RobinDeVoe-bg]

This video was very informative. Thank you for the very detailed information.

[VickieDuchscherer]

Fantastic video Julee!! I shared on a few of my social media accts. Excellent info!!!

[InspiredADUs]

Julee you are such a great resource!! Your videos are so helpful as we try to educate and teach about ADUs (we are better at the architecture!)

[gbvxquh]

Excellent and detailed overview. You've helped me to know how much more I want to learn to make the best choices. Thank you!

[RDZ]

This was a fantastically informative summary, thank you!

[Encountered_The_th_Kind]

Thank you very much for this video I’ve been contemplating and thinking on how to fund my ADU project 😅 unfortunately I’m not one of the lucky “cash on hand” people 😞

[TinyHousesLosAngeles]

Excellent presentation, organization, and information.

[humor]

You did a wonderful job at explanation and very informative. I've taken really good notes. You have explained each type of loan precisely. You've answered all my questions I had for my loan officer I'm working with. I really do appreciate your video. I'm in the middle of trying to figure out what's a good loan for a ADU. Thanks You have been a great help.🎉👍💯

[sharonbeatty]

Great overview and explanation. Thank you

[lynellejohnson]

Your video is packed with information! I took almost 6 pages of notes. I may reach out in the future. I'm still doing lots of research. Are you in the Portland Oregon area?