Finance in LA
How LA homeowners actually finance ADUs in 2025 — HELOC, cash-out refi, construction-to-perm, and the new ADU-specific lenders worth knowing.
- HELOC
- 8.0–9.5% variable, 10-yr draw
- Construction loan
- 8.5–10.5% interest-only during build
- Cash-out refi
- 6.75–7.75% fixed, 30-yr
- Renofi / ADU-specific
- 7.5–9.0% uses projected ARV
ADU financing in LA is more sophisticated than it was three years ago. HELOCs remain the fastest path; construction-to-perm loans dominate the mid-market; and a small group of ADU-specific lenders now underwrite using projected rental income. Pick the wrong product and you'll pay 2 points more than you needed to.
04.01Match the product to the project
Under $200K and you have equity → HELOC. $200K–$400K and you'll keep the property long-term → cash-out refi. Custom build, multiple draws, contingency volatility → construction-to-perm. Limited current equity but strong projected rents → an ADU-specific lender like Renofi.
04.02What lenders actually look at
Current home equity, debt-to-income, FICO, and (for ADU-specific products) appraised after-repair value with projected rental income. A clean appraisal that includes the ADU's projected income is worth more than a half-point rate negotiation.
04.03Tax and basis treatment
ADU construction is a capital improvement — costs add to your basis and reduce future capital gains exposure. Interest on construction loans secured by the primary residence is generally deductible up to the IRS limit. Confirm with your CPA; rules shift.
From the desk
- 5 min
HELOC vs. construction loan: a $40K decision
Same project, two financing paths, very different total interest.
- 6 min
How ADU-specific lenders underwrite projected rent
What Renofi and peers actually require — and what they ignore.