Lending Options for California ADU Build
Hi BP Fam,
I am looking for ideas on financing an accessory dwelling unit built on my primary residence. I need to borrow $110k, and the ARV $815k with a current value of $715k. The mortgage is $643k with a 2.6% interest rate with no other note on the property. Looking for a lender that would take the second position and use the ARV. It would be a bonus if they counted the $1800 projected rental income. I have an investment home where we built another ADU and just started an LLC. I was thinking maybe a business line of credit, but the LLC is only a few months old, and I've had this rental property since 2017. I also have equity on my investment property but its been difficult trying to find lenders who do seconds on an investment property. The investment home is worth $800k, and I owe $447k on it with the note at a 2.9% interest. Thanks BP fam!
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Quote from @Juan Ayala:
Hi BP Fam,
I am looking for ideas on financing an accessory dwelling unit built on my primary residence. I need to borrow $110k, and the ARV $815k with a current value of $715k. The mortgage is $643k with a 2.6% interest rate with no other note on the property. Looking for a lender that would take the second position and use the ARV. It would be a bonus if they counted the $1800 projected rental income. I have an investment home where we built another ADU and just started an LLC. I was thinking maybe a business line of credit, but the LLC is only a few months old, and I've had this rental property since 2017. I also have equity on my investment property but its been difficult trying to find lenders who do seconds on an investment property. The investment home is worth $800k, and I owe $447k on it with the note at a 2.9% interest. Thanks BP fam!
Hey Juan,
A HELOC could make sense to finance your ADU as long as you pay off the balance. If you know how much you will need, A HELOAN could also work. There are also ADU programs through CALHFA that can help with financing this project.
Seconds do exist for Investment properties in the private money/hedge fund/hard money space. I suggest working with a broker to see which loan would best suit your situation.
Happy to connect
Hi Juan,
In case it can help, you might also consider unsecured funding. Funds can be used for down payment or gap funding, as well as 100% funding of a purchase.
Be happy to connect.
Best,
Dave
Hi Juan, I would recommend a HELOC or a 2nd mortgage. I'm a mortgage broker and I'm also an ADU Specialist (took classes and a graded exam). I'd be happy to discuss. Good idea to not touch the first since the rate is low.
Renofi offers an excellent fixed rate second position loan based on ARV. No refinancing of your existing loan is required and terms are up to 20 years, plus there are no "draws" like a construction loan.
Quote from @Whitney Hill:Unfortunately my DTI is to high for them. I believe the lender they would set me up with only does up to 43%. I am slightly above that.
Renofi offers an excellent fixed rate second position loan based on ARV. No refinancing of your existing loan is required and terms are up to 20 years, plus there are no "draws" like a construction loan.