Financing
Florida ADU Financing
Most homeowners and investors in Florida choose to finance their ADU construction through a loan. Visionary Dwelling has partnered with trusted lenders across the state to connect you with the best financing options available. With years of experience working with vetted lenders, we are confident they can provide tailored loan solutions to fit your financial needs. As part of Visionary Dwelling’s comprehensive service package, our approved lenders will guide you through the process, ensuring that you have all the necessary documents for smooth loan underwriting and approval. Whether you're building a granny flat, casita, or guest house, we're here to help you navigate the financial side of your ADU project in Florida.
We have outlined the best options below to finance the construction of your new companion dwelling
Cash-Out Refinance
A cash-out refinance allows you to replace your existing mortgage with a new loan that exceeds your current balance, giving you access to the difference in cash. To qualify, you must have sufficient equity in your home, as lenders typically allow financing up to 80% loan-to-value (LTV). The cash received can be used toward the construction of your new ADU or companion unit. This type of loan offers several advantages, including fixed interest rates, typically lower rates compared to other loan options, and potential tax deductions on mortgage interest. For example, if your home is worth $800K and you currently owe $450K, you could potentially secure a new loan of approximately $640K, providing $190K in cash to fund your backyard home project.
Home Equity Line of Credit (HELOC)
A home equity line of credit (HELOC), often called a second mortgage, is another option for financing your ADU construction. One of its key benefits is flexibility, as you can withdraw funds as needed and only pay interest on the amount used. However, there are some drawbacks, including higher interest rates compared to primary mortgages, variable rates that can fluctuate over time, and no tax deductions on interest payments. Typically, lenders allow an 80% loan-to-value (LTV) ratio on primary residences. For example, if your home is appraised at $800K and your current mortgage balance is $450K, you could qualify for a HELOC of approximately $190K ($800K × 80% = $640K - $450K = $190K), providing additional funds for your ADU project.
Renovation Loan
(Fannie Mae Homestyle)
Renovation loans are a type of construction loan that allow homeowners to finance their project based on the future appraised value of the property. This option is especially beneficial for those who lack sufficient equity in their current home. However, these loans typically take 60–90 days to fund due to the coordination required between the lender, homeowner, contractor, and HUD inspector. The appraiser determines the post-construction value using the design plans and contractor bids, while the HUD inspector oversees the project and ensures that payments are made to the contractor according to a set schedule. Unlike other loans, the bank does not provide funds directly to the homeowner. One example is the Fannie Mae Homestyle loan, which had a conforming limit of $879,750 for a single-unit property and $1,126,250 for a two-unit property in 2022. These loans generally have higher interest rates and are often refinanced once the project is completed.
Home Equity Conversion Mortgage
(HECM, ages 62+)
A home equity conversion mortgage is better known as a “reverse mortgage”. In order to qualify, one of the homeowners must be 62 or older, the property must be your primary residence and you must have significant equity in the home. The owner takes equity out of their home and can use those funds to finance their granny flat construction. Disbursements are usually monthly, given as a line of credit without fund control or a combination of both. The homeowner can borrow up to 42% of the home’s value at age 62, up to a maximum of 70% at age 86 or more. Third-party financial counseling is mandatory for those willing to take out a HECM loan. Some of the benefits of a “reverse mortgage” are interest rates are not based on credit score and history and there is no minimum monthly payment. HECM loans are no recourse FHA loans and there is no time limit as long as you reside in the home. The maximum appraised value is set annually in November and is used to determine the loan amount. The latest value set in 2021 is $970,800.
Construction Loan
A construction loan is another financing option for building an ADU, especially for homeowners who lack sufficient equity or have a loan-to-value (LTV) ratio near the conforming limit. These are temporary loans designed to cover construction costs, typically starting at $150,000 or more. They offer interest-only payments during the build phase, after which the loan can be refinanced into a single mortgage that includes both the ADU and the primary dwelling. However, construction loans tend to be more complex, particularly for smaller loan amounts, due to the extensive lender requirements and oversight involved in the process.
Free Appraisal
Lenders in our matching program are currently offering a free property appraisal! Don’t miss this limited-time opportunity—contact us today to take advantage of this exclusive offer.
Not sure which option is right for you?
Contact us today so that we can connect you with our vetted lenders to learn more.
*This is for informational purposes only. Our lender matching program does not constitute and guarantees, warranties or promises regarding the outcome of your financing.
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Visionary Dwelling provides a seamless, turnkey solution for homeowners looking to build an ADU or backyard home in Florida. Backed by over 25 years of experience, our in-house licensed building team specializes in constructing high-quality homes and multi-family buildings throughout the Florida area.
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