Building an Accessory Dwelling Unit (ADU) is one of the smartest investments California homeowners can make, offering flexibility, additional income, and higher property value. However, financing remains one of the biggest questions for those starting the journey. At Joy Line Homes, we help clients in Santa Clara, Campbell, Cupertino, Milpitas, Saratoga, and Los Gatos understand the best ways to fund their modular ADU projects with clarity and confidence.

Home Equity Loans and Lines of Credit

One of the most popular options for financing an ADU is through a home equity loan or home equity line of credit (HELOC). These allow homeowners to borrow against the value of their property, often with competitive interest rates. A home equity loan provides a lump sum with fixed payments, while a HELOC works like a revolving credit line, ideal for phased construction projects.

Cash-Out Refinance

Refinancing your mortgage to access built-up equity is another powerful tool. A cash-out refinance replaces your existing loan with a new, larger mortgage, allowing you to use the difference for your ADU build. This option simplifies payments and may lower overall interest rates if timed correctly. Joy Line Homes frequently assists clients with lenders familiar with modular projects to ensure a smooth process.

Construction Loans and Renovation Financing

For larger or custom ADUs, construction loans offer short-term funding that converts to a traditional mortgage once the project is complete. Renovation loans, such as FHA 203(k), combine purchase and renovation costs into one loan. These financing types work well for modular ADUs because lenders can release funds in phases that align with Joy Line Homes’ construction milestones.

State and Local ADU Incentives

California supports ADU development through grants and subsidies. Programs such as the CalHFA ADU Grant offer up to $40,000 toward pre-development expenses, helping homeowners manage design and permitting costs. Local governments in Santa Clara County and nearby areas also provide reduced permit fees or low-interest financing options to encourage ADU growth.

Whether through equity, refinancing, or state incentives, financing your ADU has never been more accessible. With guidance from Joy Line Homes and trusted lending partners, California homeowners can confidently turn their backyard projects into lasting investments.