Go Far®Start with the number you are financing
In the Seattle–Snohomish County market, an ADU budget runs from roughly $60,000–$100,000 for a straightforward basement conversion to $250,000–$450,000 for a new detached backyard cottage (DADU), with garage conversions in between. Very few households write that check from savings — almost every ADU we build is financed, most often against the equity already sitting in the main house.
One honest note before the options: we are builders, not lenders. Use this as a map of the routes Washington homeowners actually take, then confirm terms and qualification with a licensed lender — programs and rates change.
Home equity: the workhorse of ADU financing
- HELOC (home equity line of credit). The most common route we see. You draw as construction progresses, pay interest only on what you have drawn, and keep flexibility if the scope shifts. Well suited to phased projects like a basement or garage conversion.
- Home equity loan. A fixed lump sum at a fixed rate — predictable payments, and a good match when the build has one firm, itemized price up front.
- Cash-out refinance. Replaces your current mortgage with a larger one and hands you the difference. It can unlock the most money in one move, but it reprices your whole mortgage — the math depends heavily on the rate you would be giving up.
Puget Sound homeowners who bought more than a few years ago are often sitting on more usable equity than they expect — which is exactly why ADUs pencil here.
Renovation and construction loans
If your equity does not cover the build, renovation loans are designed for this gap: programs in the Fannie Mae HomeStyle and Freddie Mac CHOICERenovation family — and FHA 203(k) for those who qualify — let you borrow against the home’s after-renovation value rather than today’s value. For a new detached cottage, some lenders instead write a construction loan that converts to permanent financing when the unit is done. Both routes involve appraisals, draw schedules, and lender inspections — which is one more reason to start from a detailed, itemized construction contract.
Can the future rent help you qualify?
Sometimes, yes. Because ADUs are income-producing, some loan programs allow a portion of the unit’s expected rental income to count toward qualification, and investor-style products underwrite primarily on the property’s cash flow. Policies differ lender to lender and change year to year, so raise it early in the conversation — it can be the difference between a project that qualifies and one that stalls.
How a fixed, itemized bid makes financing easier
Every financing route above ends in the same place: a lender who wants to know exactly what is being built, for exactly how much, on what schedule. That is how we quote by default — a free, no-obligation estimate with itemized written pricing that you can hand straight to your loan officer, followed by a build with inspected phases that maps cleanly onto lender draw schedules. If you are weighing an attached ADU, a backyard cottage, or a conversion, we are happy to price the project first so your lender has a real number to work with.