How to Finance Your ADU in Houston

Compare rates, find local lenders, and discover local grants to fund your backyard cottage or garage conversion in 2026.

Financing Options Comparison

Loan Type	Rate	Max Amount	Pros	Cons
HELOC	7.5% - 9.5%	Up to 85% LTV	Flexible draws Interest only period	Variable rates Requires current equity
Cash-Out Refi	6.5% - 7.5%	Up to 80% LTV	Fixed rate Single mortgage	Resets 30yr clock High closing costs
Construction Loan	7.0% - 9.0%	Based on future value	Great for low equity Large loan amounts	Complex draws Higher rates initially
Home Equity Investment	No Monthly Pmt	Up to $300k	No monthly payments Easy qualification	Give up future appreciation Expensive long-term

Local Grants & Incentives in Houston

City of Houston Free ADU Plans

The city offers free pre-approved ADU design plans ('Double House') to reduce design costs.

Value: Free Design Plans

Top ADU Lenders Operating in Houston

Frost Bank

Local Construction Loans & HELOCs

Rates: From 7.5%
Max Loan: $500,000

Texas Dow Employees Credit Union

Home Equity Loans for Houston Homeowners

Rates: From 7.0%
Max Loan: Subject to LTV

Prosperity Bank

Construction-to-Permanent Loans

Rates: From 7.75%
Max Loan: $500,000

RenoFi

ADU-Specific Renovation Financing

Rates: From 7.25%
Max Loan: $500,000

Figure

Fast Online HELOC (5-Day Funding)

Rates: From 7.75%
Max Loan: $400,000

LightStream

Unsecured Home Improvement Loans

Rates: From 7.49%
Max Loan: $100,000

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