Los Angeles homeowners are sitting on equity that can build an ADU — and an ADU can generate $1,500–$3,000/month in rental income. Let's turn your equity into a cash-flowing asset.
There's no one-size-fits-all answer for ADU financing. The right approach depends on how much equity you have, your current rate, and how quickly you need funds. Here's how each option works:
A Home Equity Line of Credit lets you draw funds as you need them during construction — you only pay interest on what you use. Best if you want flexibility and have 20%+ equity.
Refinance your existing mortgage and pull out equity in a lump sum. Best if your current rate is near market and you want one simple payment. Funds available at close.
A short-term loan that covers construction costs, then converts to a permanent mortgage. Best for larger builds or if you have limited existing equity.
| Feature | HELOC | Cash-Out Refi | Construction Loan |
|---|---|---|---|
| How funds are disbursed | Draw as needed | Lump sum at close | In draws during build |
| Affects existing mortgage? | No — 2nd lien | Yes — replaces 1st | Varies |
| Best for | Flexibility, phased builds | Lump sum needed now | Large or complex builds |
| Min equity required | ~20% | ~20% | Lower — future value used |
| Rate type | Variable (Prime-based) | Fixed or ARM | Short-term, then permanent |
| Closing costs | Low | Standard refi costs | Higher |
California offers grant programs that can offset ADU pre-development costs — including plans, permits, and site prep fees. Combined with a HELOC or cash-out refi, these programs can significantly reduce your out-of-pocket costs before construction begins.
Up to $40,000 in grant funds for predevelopment costs (plans, permits, site prep) for qualifying homeowners. Does not need to be repaid if you build the ADU.
CalHFA programs have income limits based on county median income. I'll verify eligibility as part of your initial consultation — no paperwork required upfront.
California's SB 9 streamlines ADU permitting statewide. Santa Clarita, Burbank, and Glendale each have additional local ADU programs worth exploring.
Tell me your address and rough current mortgage balance. I'll estimate your available equity and walk you through which financing option fits your situation — no cost, no commitment.
We'll select the right product — HELOC, cash-out refi, or construction loan — and I'll explain exactly how much you can access, at what rate, and what the monthly payment looks like.
A quick appraisal confirms your home's current value. Most ADU financing approvals come through in 2–3 weeks from application.
Once the loan closes, your funds are available to pay contractors. A HELOC lets you draw as each phase completes; a cash-out refi puts the full amount in your account at closing.
A free equity review takes 10 minutes and tells you exactly what you can access, which financing path makes sense, and what an ADU could realistically generate for you each month.
Sunny Home Loans, LLC · NMLS #2340228 · Harout · NMLS #2543120
Sunny Home Loans, LLC · NMLS #2340228 · Harout · NMLS #2543120 · Licensed by the California Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. All loan programs subject to credit approval. Rates, terms, and availability may vary and are subject to change without notice. This is not a commitment to lend. DSCR and bank statement programs are for non-owner-occupied investment properties and self-employed borrowers respectively — additional restrictions may apply. Equal Housing Lender.