ADU Loan Features and Terms
| Feature | ADU Loans |
|---|---|
| Loan Type | Real estate-secured loan |
| Lien Position | 1st or 2nd Position |
| Loan Term | 1-3 years |
| Interest Rates | Fixed and Adjustable Rates Available |
| Loan Amount | $100,000 minimum |
| ARV | Up to 65% of the ARV (After Repair Value) |
| Credit Score | 600 min |
| Occupancy | Primary residences in California; investment properties nationwide |
| Property Types Allowed | 1-4 unit residential |
| Prepayment Penalty | Flexible |
| Closing Time | As little as 2 weeks |
At Westpark Loans, we understand that every investor’s situation is unique. That’s why our ADU loans offer versatile financing options tailored to your specific project needs. Whether you’re undertaking a new construction project from the ground up, converting an existing space like a garage, or purchasing a prefabricated unit, our loan products are structured to support your goals. We simplify the financing process, so you can focus on bringing your vision for a new living space to life.
What is an ADU Loan?
Westpark Loans offers ADU (accessory dwelling unit) loans in California, providing flexible financing solutions for real estate investors looking to build or renovate ADUs. These loans are ideal for those seeking to add value and generate additional income from their properties.
ADU loans are designed to finance the construction or renovation of accessory dwelling units. ADUs are secondary housing units on a single-family residential lot, such as in-law units, granny flats, or backyard cottages. These loans provide the capital needed to create additional living space that can be rented out or used for family members. If you’re someone who could benefit from an ADU, an ADU loan can make it easy to get started on the project in a timely manner.
ADU Loan Features and Benefits
Flexible Financing Options: ADU Loans offer flexible financing options, including both first and second lien positions, to meet the diverse needs of borrowers.
ADU loans can be structured as second liens, helping investors preserve their existing low-rate first mortgages. Keeping a low-rate first mortgage intact is a huge selling point for investors right now.
Competitive Interest Rates: These loans come with competitive interest rates, ensuring affordable monthly payments.
High Loan-to-Value Ratios: Borrowers can benefit from high LTV ratios, ensuring substantial financing for ADU construction or renovation.
Customizable Loan Terms: ADU Loans provide flexible terms, allowing borrowers to choose repayment schedules that fit their financial plans.
Increased Property Value: Building or renovating an ADU can significantly increase the value of your property and provide additional rental income.
Who Would Benefit from an ADU Loan?
Homeowners: Homeowners looking to add an ADU to their property can benefit from the flexible financing options of ADU loans in California, increasing their property value and generating additional rental income.
Real Estate Investors: Investors seeking to expand their rental portfolio by building or renovating ADUs can leverage ADU Loans for financing.
Multi-Generational Families: Families looking to create additional living space for elderly parents or adult children can use ADU Loans to build in-law units or backyard cottages.
Property Flippers: Individuals looking to buy, renovate, and sell properties quickly can benefit from the fast approval and flexible terms of ADU Loans.
ADU Loan Example
Case Study: Karen’s ADU Project in Long Beach
Karen, a real estate investor, aimed to add an ADU to her property in Long Beach, California. She approached Westpark Loans for an ADU construction loan to finance her project.
Property Details:
- Location: Long Beach, California
- Estimated After Completion Value (ARV): $1,400,000
- Existing 1st TD Loan Amount: $400,000
- New 2nd TD Loan Amount: $380,000
- Combined Loan Amounts: $780,000
- Combined Loan-to-Value (CLTV): 55.71%
- Loan Term: 18 Months
- Interest Rate: 13.50%
- Monthly Payment: $4,275
- Funds Control: $325,000
With the help of Westpark Loans, Karen secured the necessary funding quickly. The interest-only payments during the construction phase allowed her to manage her cash flow effectively. Upon completion, the ADU significantly increased the property’s value and provided a substantial rental income, enhancing her investment portfolio.
Frequently Asked Questions
ADU loans are used to finance the construction or renovation of accessory dwelling units (ADUs).
Yes, ADU loans can be used for rental properties.
ADU loans typically have terms ranging from 10 to 30 years.
Requirements vary, but generally, you need property ownership and proof of income.
Approval and funding can typically occur within 30-45 days.
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