How to Finance an ADU in Florida
- Typical LTV: Up to 80–85% combined loan-to-value
- Rate: Variable (prime + margin), currently 7.5–9.5% in 2026
- Pros: Flexible draws, interest-only during draw period
- Cons: Variable rate risk, requires sufficient equity
- Rate: Fixed, currently 7.0–8.5% in 2026
- Term: 10–20 years
- Pros: Fixed rate and payment, lump sum
- Cons: Less flexible than HELOC if costs change
- Consideration: Only makes sense if you can get a rate at or below your current rate
- Closing costs: 2–4% of loan amount
- Typical structure: 12-month draw period, then converts to 30-year fixed
- Requirements: Permitted plans, contractor bids, builder qualification
- LTV: Typically based on future appraised value (as-completed appraisal)
- Credit score (typically 680+ minimum, 720+ for best rates)
- Income documentation (W-2 or 1099, 2 years)
- Existing mortgage statement
- Property appraisal
- Permitted ADU plans and contractor estimate
Financing is often the biggest barrier to ADU development in Florida. Here's a practical breakdown of the most common financing paths and what each requires.
Option 1: HELOC (Home Equity Line of Credit)
A HELOC lets you borrow against your home's equity with a revolving credit line — similar to a credit card backed by your house.
Best for: Homeowners with significant equity who want flexibility to draw funds as the project progresses.
Example: Home worth $600,000 with $300,000 mortgage = $210,000 available HELOC (at 85% LTV)
Option 2: Home Equity Loan
A lump-sum loan at a fixed rate, secured by your home equity.
Best for: Homeowners who want a predictable fixed payment and know their total project cost upfront.
Option 3: Cash-Out Refinance
Refinance your existing mortgage at a higher amount and take the difference as cash.
Best for: Homeowners with a rate already above current market rates (less common in 2026 given the rate environment).
Option 4: Construction Loan
A short-term loan that funds the construction process and converts to a permanent mortgage at completion.
Best for: Larger ADU projects where the total cost exceeds available equity.
What Lenders Will Ask For
ADU4Florida's Role in Financing
ADU4Florida doesn't act as a lender, but helps you understand your financing options and connects you with lenders familiar with Florida ADU projects. We can help you prepare the project documentation lenders typically require.