Accessory dwelling units (ADUs) are also called granny flats, backyard cottages or secondary units. An ADU is a smaller, independent housing unit on the same parcel as a single-family residence. As an effective way of adding much-needed housing, ADUs are widely recognized as an innovative, cost-effective option. So, how do you fund your ADU project?
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Local Government Grant and Loan Programs
Local governments can provide grants or loans for certain ADUs constructed for specific purposes. There are programs designed to help house the homeless, providing loans for ADU construction. You can contact your housing authorities if there is a program that fits your needs to help you finance your ADU unit.
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Construction Loan
New addition contractors like Design Build Remodeling Group of Maryland offer construction loans to help you build your own ADU. Usually, for a construction loan, a lender may extend the original construction period by no more than 18 months if it is necessary to complete the construction. However, documents may not indicate more than 12 months for the initial construction period or other extensions.
Borrowers who wish to use both a construction loan and permanent financing at the same time may use single-closing transactions. A lender will be responsible for handling the disbursement of the loan proceeds to a builder, contractor or any other authorized contractor and supplier in a single-closing transaction.
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Cash-Out Refinancing
When you refinance your mortgage with cash out, you receive a lump-sum payment that you repay over time along with your monthly mortgage payment. A homeowner could use this option to change mortgage providers, lower the rate or consolidate the new project expenses into an existing loan. In case your home value increases over time, you can be eligible to refinance it for its current value and get cash out based on the current property value.
Let us bring your dream kitchen to life. For your kitchen remodeling project, Design Build Remodeling Group of Maryland has got you covered. Call us at (443) 300-2268, or fill out our contact form to book an appointment. We serve homeowners in Washington, DC.
