HELOC vs Construction Loan vs Cash-Out Refi
The three main ways to finance an ADU in 2026 — compared by rate, how funds are released, and which borrower each one fits best.
Lowest typical ADU financing rate
0.0%
starting APR — cash-out refi (indicative, 2026)
Typical APR range by product (2026, indicative)
Bars are scaled across the 6.8%–10.5% range. Lower/left = cheaper. Rates move constantly — confirm current quotes.
🔑 HELOC
Home Equity Line of Credit
7.5–9.5%
How it works: Revolving credit line; draw as you build
Best for: Phased builds, flexible draws, keeping your low first-mortgage rate
Only pay interest on what you draw
Keeps existing mortgage intact
Reusable line
Variable rate
Needs existing equity
🏗️ Construction Loan
Construction / Renovation Loan
8–10.5%
How it works: Funds released in stages tied to build milestones
Best for: Ground-up ADU builds, borrowers with limited current equity
Based on after-build value (more borrowing power)
Structured draw schedule
No equity required upfront
Higher rate
More paperwork / inspections
Often converts to a new mortgage
💵 Cash-Out Refi
Cash-Out Refinance
6.8–8.5%
How it works: Replace your mortgage with a larger one; pocket the difference
Best for: Owners with lots of equity AND a current mortgage rate at/above market
Often the lowest rate
One single payment
Fixed-rate option
Resets/replaces your mortgage
Closing costs
Bad if you hold a low legacy rate
💰 See your real rate in minutes.
Compare personalized offers across HELOCs, construction loans, and cash-out refis from multiple lenders. Checking your rate won't affect your credit score.
Data & method: APR ranges are indicative 2026 figures for typical, well-qualified borrowers and vary by lender, credit, equity, and loan size. Rates change frequently — this page is refreshed periodically, but always confirm a live quote.
Disclaimer: This is general educational information, not financial or lending advice, and not an offer of credit. Compare current terms with licensed lenders before deciding.
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