San Diego ADU financing guide 2026: loans, payments and programs

Often yes, under each program's rules, and never on a cash-out refinance. FHA lets a lender count 75% of the lesser of the appraiser's market rent or your lease from an existing ADU on a one-unit home, capped at 30% of your qualifying income. For an ADU that is not built yet, FHA's Standard 203(k) counts 50% of the projected rent. Freddie Mac uses the same 75% and 30% limits on a one-unit primary residence and ignores rent from an unpermitted ADU. Fannie Mae, which had counted ADU rent only under its HomeReady program, extended it to standard purchases and limited cash-out refinances in October 2025, also capped at 30%.

A HELOC or home equity loan is not an agency loan, so those rules do not apply and each bank sets its own. Lenders add their own overlays on top of all of this.

There is no single best loan. It depends on your equity, your current mortgage rate, and the size of the build. A home equity loan is a fixed-rate lump sum and a HELOC is a variable-rate line you draw as bills arrive; both leave your first mortgage alone. A cash-out refinance replaces the whole mortgage, which costs more when your existing rate sits below the 30-year average, 7.03% in the week of September 24, 2026. If equity is thin or the build is large, a renovation loan such as HomeStyle or CHOICERenovation lends against the value once the ADU is finished.

The CalHFA grant closed in December 2023. BHI Builders does not arrange loans; the calculator above shows what each option adds to your month so you can walk into a lender's office with a range.

Match the loan to your situation. A HELOC is an open line secured by your home: you draw during a draw period, pay interest on what you use, then enter a repayment period, usually at a variable rate. A home equity loan is a fixed-rate lump sum, better once the budget is settled. A cash-out refinance reprices your entire mortgage at today's market, 7.03% for a 30-year fixed in the week of September 24, 2026, so it fits best when your current rate is already near that. A renovation or construction loan is underwritten on the as-completed value, which helps when equity is thin.

Either way, your home is the collateral. The chart above puts all five financed options side by side for your numbers.

No. CalHFA says the latest round of ADU grant funding was fully allocated on December 28, 2023, it is not accepting applications, and anyone claiming they can get you the grant now should be treated as a scam. When it ran, the program reimbursed up to $40,000 of pre-development costs such as site prep, design, permits, soil tests, impact fees, surveys, and energy reports. CalHFA's report to the Legislature says the grant started at $25,000 in 2021, rose to $40,000 in March 2022, and Phase 2 was limited to lower-income homeowners, with $125 million across both phases.

No new round has been announced. Check calhfa.ca.gov/adu before you plan around one.

Start with the cost calculator on this site. It prices your answers as a low and a high rather than one number, and the button at the bottom of its estimate brings that band straight into the loan calculator above, less whatever cash you plan to put in. Permit costs stack on top: plan check and building permit fees depend on valuation and square footage, and the City's bulletin says ADUs and JADUs owe school fees. Development Impact Fees are a different story: none under 750 sq ft anywhere in California, and in the City of San Diego none on the first two ADUs on a lot at any size.

Yes, some products are built for that. Fannie Mae's HomeStyle Renovation and Freddie Mac's CHOICERenovation are underwritten on the appraiser's as-completed value, the value once the ADU exists, so the loan can exceed what your current equity would support. HomeStyle allows renovation costs up to 75% of that completed value. FHA's Standard 203(k) also finances adding an ADU and lets the lender count 50% of projected rent when there is no rental history.

In the City of San Diego, homeowners at or below 80% of area median income can apply to the Housing Commission for a construction loan of up to $250,000 at 3% fixed, subject to funds being available.

It depends on the amount, the rate, and the term, so treat any figure as an illustration, not an offer. In late September 2026 the average 30-year fixed mortgage rate was 7.03% and the national average HELOC rate was 7.28%. At those rates, $250,000 over 30 years costs about $1,668 a month, and the same balance on an interest-only HELOC costs about $1,517 a month during the draw period. HELOC payments usually rise when the repayment period begins, and a variable rate can move the payment even if you draw nothing more.

Your rate will differ with your credit, your equity, and your lender. The calculator above runs your own numbers as a range.

Yes, you can. A cash-out refinance replaces your current mortgage with a larger one and pays you the difference at closing. Freddie Mac caps it at 80% of the home's value on a primary residence, and Fannie Mae requires that a borrower has been on title for six months and that any mortgage being paid off is at least a year old. The trade-off is the rate: you reprice the whole balance at today's market, 7.03% for a 30-year fixed in the week of September 24, 2026. If your current mortgage is at 3% or 4%, that repricing often costs more each month than the ADU itself, which is why the calculator above shows it on its own line.

One more limit: no agency program counts ADU rent toward qualifying on a cash-out refinance.

A construction or renovation loan pays for the build in stages instead of one lump sum, and the lender sizes it on what the property will be worth when the ADU is done. Fannie Mae's HomeStyle Renovation requires an appraisal with an as-completed value and caps renovation costs at 75% of it. A single-closing construction-to-permanent loan converts to a regular mortgage automatically when the work is complete, with construction limited to 12 months, and during that phase you pay interest only on what has been drawn.

Lenders want plans, a budget, and a signed contract with a licensed contractor before they close. Bring the estimate range from this site rather than a single number.

Yes, within limits. FHA's October 2023 mortgagee letter added ADUs to the improvements eligible under the Standard 203(k) program and lets the lender count 50% of projected ADU rent when there is no rental history. The Limited 203(k) is capped at $75,000 and covers non-structural work, so a new ADU usually needs the Standard version, which starts at $5,000 in work. Fannie Mae's HomeStyle Renovation lends on the as-completed value for a one- to four-unit principal residence, and Freddie Mac's CHOICERenovation can finance a new or existing ADU.

One caution: California HCD's handbook says a 203(k) may only be used to build an attached ADU. Ask an FHA lender before you plan a detached unit around it.

Not development impact fees. State law exempts an ADU with 750 sq ft of interior livable space or less from impact fees charged by local agencies, special districts, and water corporations; above 750 sq ft the fee must be proportional to the size of the primary home, and from January 1, 2027, with one or two ADUs on a lot, it applies only to the area above 750 sq ft (SB 1117). The City of San Diego goes further: the first two ADUs on a premises are exempt from its Development Impact Fee at any size outside the bonus program, and any ADU is exempt when the owner records a three-year owner-occupancy affidavit.

You still pay plan check and building permit fees, and the City's ADU bulletin says ADUs and JADUs owe school fees. Utility connection fees and capacity charges are outside the exemption too.

Yes, but only for the new construction. The California Board of Equalization explains that the assessor estimates the market value the new construction added and enrolls that as its own base year value; the value of the existing property is not affected, so your house keeps its Proposition 13 assessment. The base tax rate is 1% of assessed value plus local bonds and charges, so a unit the assessor values at $200,000 adds roughly $2,000 a year before those extras. Expect a supplemental bill after the unit is finished rather than at the next annual cycle.

Ask the County Assessor or a tax professional about your parcel. This page does not give tax advice.

There is no single number; each program and lender sets its own floor. For conventional loans sold to Fannie Mae, the minimum representative score is 620 for fixed-rate loans and 640 for adjustable-rate loans. FHA's baseline is 580 for a 3.5% down payment and 500 to 579 with 10% down, though lenders often add stricter overlays. The San Diego Housing Commission's ADU construction loan requires at least 680. HELOC floors are set by each bank.

A higher score generally earns a better rate, so check your report before you talk to lenders.

The San Diego Housing Commission's ADU Finance Program offers a construction loan of up to $250,000 at 3% fixed, as a second lien up to 75% loan-to-value, plus free technical help with permits and design. You need an owner-occupied detached single-family home in the City of San Diego, household income at or below 80% of area median income, and a credit score of 680 or higher, and the ADU must rent to households at or below 80% of AMI for seven years. The application portal still carries a notice about limited funds from an earlier fiscal year, so email adu@sdhc.org to check that money is available.

El Cajon runs a deferred ADU loan for its homeowners, National City lists one as coming soon, and Vista and Encinitas waive fees rather than lend. The programs table above has each one with its status and link.

BHI Builders does not arrange, broker, or refer loans, and this page is not an offer of credit. What we do is give you a cost range you can take to any lender, and a plain explanation of the products lenders actually use for ADUs. A lender who sees a low and a high knows you have thought about it.

Whoever you borrow from, you have the right to cancel a home equity loan or HELOC within three business days of closing, and your home is the collateral on every option on this page except cash.