Can you use your home equity to finance an ADU or in-law unit?

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Your home equity can be a source of funding for just about anything, including an ADU. Here's what you should know.

With housing costs still high and a growing need for multi-generational living solutions, accessory dwelling units are becoming an increasingly popular option for homeowners. An ADU is a separate living space on your property with its own kitchen, bathroom and entrance — essentially a small apartment that can be used for a wide range of purposes, from housing elderly family members to a short-term vacation rental.

This type of home equity funding gives you access to a line of credit rather than a lump sum loan, which allows you to draw cash as you need it up to the approved credit limit. It also comes with a variable interest rate and revolving balance during the draw period.When you're financing an ADU build, a HELOC can be advantageous because it lets you access funds incrementally as construction progresses rather than getting all the cash upfront as a lump sum.

 

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