Financing Options after constructing 4 ADUs

[Andy Chen]

Hi all, need your suggestions. 

I am planning to build 4 ADUs on my triplex. My primary mortgage rate is excellent and I definitely don't want to lose it.

Any suggestions to cash out refinance at fixed rate without losing the primary mortgage after construction?

I have looked into HELOC or HE loan, the max is only $500k. The added value (market value) from the ADUs would be around $1.5~2M and the total cost for the project is around 700K.

Note: After construction, it will be 7 units and it could fall under commercial loan.

I am hoping to do a 2nd loan to pay off the construction cost and cash out without losing the primary loan.

Any suggestions? Thanks in advance.

[Jonathan Taylor]

@Andy Chen This sounds like a big project but there isnt a way to do a full cash out loan and simultaneously leaving the low rate first note in place. Its either or. Do you live on this property or is it under an investment property loan?

Additionally, adding 4 ADUs does not make this a commercial property unless your lot is ZONED commercial. If it is zoned Residential, this is considered a residential asset with additional ADUs. That sounds off but I have dealt with this issue in CA since the ADU laws came to fruition.

A close ended registered second position would be a good idea, CLTV vary by lender but you can put another note on the property to pull cash out to reimburse for construction costs, but CLTV and rates will vary by lender. That way, you can payoff the second as soon as you can while leaving your first note in place. Not ideal but doable.