ADU Financing Options in Georgia: HELOC vs Construction Loan vs Cash-Out Refi

So you've decided to act on your dream of building an ADU to increase space, explore rental opportunities, or add value to your existing home, but you've hit a roadblock: financing. Financing an accessory dwelling unit can be quite tricky, especially if you don't know the differences between a HELOC vs a construction loan, vs a cash-out refinance. 

That's where our team comes in. At SmartSpaces ADUs, we know all about ADU financing options and want to share what we know to help you learn how to finance an ADU. In this blog, we've discussed HELOC loans, construction loans, and cash-out refinancing to help you determine which will best suit your needs. 

How to Finance Building An ADU In Georgia: HELOC VS Construction Loac VS Cash Out Refi

Below, we've explained a bit about each option and who might benefit from it the most. We hope that these explanations will help you find the best way to pay for an ADU. 

Using a HELOC for your ADU

If you want to only pull funds as needed during your ADU build, you may want to consider using a home equity line of credit (HELOC). A HELOC lets you borrow against the equity that you've built in your home, and since you only use these funds as needed, it offers a flexible approach to ADU financing. 

We recommend this option to homeowners who have seen significant appreciation in their home's value in recent years and to those who are comfortable with leveraging that equity. It's also a good option for homeowners with good credit and a steady income, since for these individuals, a HELOC is a quick and somewhat simple way to cover the cost of building an ADU, from design fees to final inspections. 

Additionally, a significant benefit to note is that the interest you will pay will only be calculated based on the payments you draw. This will help you keep costs low during the construction process. However, when building an ADU with a HELOC, it's important to know that your home isn't going to act as collateral. For this reason, it's incredibly important to ensure that your repayment plan aligns with your current budget for building an ADU. 

Considering a Construction Loan

A loan for ADU construction might be the better option if you don't have enough equity in your home or you don't want financing tied directly to the build. You can apply for an ADU construction loan that will provide funds specifically for your new space. With these ADU loans, the funds will be released in stages as work is completed. 

In our experience, there are many ADU lending companies in Georgia that offer construction loans, and there are even a few specialized ADU lending companies that can assist with navigating permits and builder agreements. Of course, there are also companies like us that can help you navigate financing to get your dream ADU built. 

Yet, before you sign for a construction loan, you'll need to investigate ADU construction loan rates. These rates can significantly impact how much you'll end up paying back after you've built your ADU. As with most loans, ADU construction loan rates fluctuate depending on the lender, your credit profile, and current market trends. 

Additionally, there are newer ADU loan options, such as RenoFI and HFS Financial, that you can explore. These often act as bridge loans or renovation-specific financing, offering the flexibility of personal loans with the lower rates of construction loans. 

Weighing a Cash‑Out Refinance

Another path some homeowners choose is an ADU cash-out refinance, which replaces your current home mortgage with a larger one and gives you the difference in cash. Many find this appealing because it leaves them with a single loan payment to manage, rather than multiple ones. If interest rates have improved since you purchased your home, this option could also lower your overall borrowing costs, as you'll be able to lock in a lower interest rate.

This type of financing can work well if you're comfortable refinancing your primary mortgage and want enough funds to cover the entire ADU build, from excavation to landscaping. However, before you race to secure this option, it's wise to calculate closing costs and understand how the new mortgage term fits into your future ADU financial planning.

Comparing the Three Options

So, what's the best way to pay for adu construction? As you now know, the answer depends on your equity, cash flow, and how you want to structure repayment. A HELOC offers flexibility if you already have significant equity. A construction loan is ideal for a fresh start with a clear builder plan. A cash‑out refinance is great if you want to simplify payments and lock in a rate for the long term.

No matter which option you choose, we recommend consulting with a lender who specialises in financing accessory dwelling unit projects. Many Georgia homeowners have found that pairing SmartSpaces ADUs' building expertise with the right lender makes the process significantly easier, so you may want to reach out to us. 

Key Tips for Successful ADU Financing

With so many loan options for ADUs available in Georgia, it's important to make the right decision. Since we know this can be hard to do, we want you to keep the following ADU finance tips in mind before committing to a specific financing avenue:

• Secure detailed quotes for all phases of construction so you know how much to borrow.
• Review your monthly budget to determine how new payments align with your financial goals.
• Make sure you consider your long-term plans for your home, such as whether you plan to rent, sell, or use it for multigenerational purposes, and choose financing based on this.

In addition to these tips, you may also want to look into specialized financial programs that offer ADU down payment assistance. 

Choose Smart Spaces for Your ADU Needs and Let Us Help You Identify the Best Financing Option

When you're ready to build an ADU, and it's time to explore ADU financing options for 2025, we hope this blog helps. Although there are many financial avenues you can look into, often ADU cash-out refinance, ADU construction loans, and HELOCs are your best bets.

If you would like help understanding which option might suit your situation, you can speak with us at SmartSpaces ADUs. We're an ADU building company that specializes in everything from tiny homes and garage conversions to attached and detached ADUs. We've worked with several ADU lending companies in the past, so we can offer guidance. 

If you're ready to take the next step and secure financing to bring your dream space to life, please contact our team here.