ADU Financing in Los Angeles: What Works in 2026

Updated October 2026

Most owners in Los Angeles pay for an ADU with their own equity: savings, a HELOC, a cash-out refinance or a renovation loan. The CalHFA grant that made headlines in 2022 and 2023 is fully allocated, and Orange County’s ADU loan program has ended.

The short version

• Four common routes: cash, HELOC, cash-out refinance, renovation loan.
• Renovation loans (Fannie Mae HomeStyle, Freddie Mac CHOICERenovation, FHA 203(k)) lend against the value after construction.
• Fannie Mae and Freddie Mac let lenders count ADU rent toward qualifying in some cases, capped at 30% of qualifying income.
• The CalHFA $40,000 ADU Grant is fully allocated, and Orange County’s ADU loan program ended in May 2025.
• No ADU impact fees below 750 sf, which lowers the amount you need to borrow.

Your options

• Cash. Fastest and simplest. Some owners build with cash, then refinance once the ADU adds value.
• HELOC. A second loan against your equity. You draw as you build and pay interest only on what you use. Rates are usually variable.
• Cash-out refinance. Replaces your first mortgage with a larger one. It makes sense when today’s rate is close to yours. Expect closing costs.
• Renovation loan. Sized on the after-completion value, so it can work with little equity. Expect permitted drawings, a licensed contractor and a draw schedule before funding.

What lenders look at

• Credit score, debt-to-income ratio and equity. Thresholds vary by lender and product, so ask for them in writing.
• An appraisal. For renovation loans, that means an “as-completed” value based on your plans.
• Projected ADU rent, where the program allows it. Freddie Mac counts at most 75% of the lease amount, and the total stays under the 30% cap.
• A real budget: permitted plans, a contractor bid and a timeline.

What to watch out for

• Don’t plan around grants. CalHFA’s 2025 outcome report lists $125 million across two funding phases, with no new round announced. Check calhfa.ca.gov/adu before counting on it.
• Scammers have offered “ADU grant” help. CalHFA warns about this directly.
• Size drives cost twice: once in construction, and again in impact fees once you pass 750 sf.
• Pre-approved standard plans from LADBS can cut design time, but site work and utilities still vary by lot.

How we use it

We start with what the lot can legally hold, then size the project to the financing. On a larger lot, that can mean more than an ADU: Beaver Live Work in San Bernardino is a long gable home with a work studio, and our small-lot subdivision work turns one lot into several sellable homes.

From our portfolio

Beaver Live Work, San Bernardino

A long, quiet gable for living and working.

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