ADU Financing — DFW
Finance Your ADU
the Smart Way
Six financing paths for DFW homeowners — from home equity loans to construction financing. We help you understand your options so you can build with confidence.
$75K – $275K
Typical ADU Cost
$1,400 – $2,600
Avg. Monthly Rental
15 – 20%
Equity Required
1 – 8 Weeks
Approval Timeline
Your Options
Six Ways to Finance Your ADU
Every homeowner's situation is different. Here's a clear breakdown of each option so you can choose the right fit.
Home Equity Loan
Borrow against your equity — fixed rate
Typical Amount
$60,000 – $250,000
Rate
Fixed · 7–9% typical
Best for: Homeowners with 20%+ equity
A home equity loan lets you borrow a lump sum against your home's equity at a fixed interest rate. Predictable monthly payments make budgeting straightforward for your ADU build.
Pros
- Fixed interest rate — no surprises
- Lump sum disbursement at closing
- Interest may be tax-deductible
- Rates typically lower than personal loans
Considerations
- –Requires 15–20% equity in your home
- –Your home is collateral
- –Closing costs apply
Cash-Out Refinance
Replace your mortgage and pull equity
Typical Amount
$100,000 – $400,000+
Rate
Fixed or ARM · 6.5–8.5% typical
Best for: Homeowners with low existing rate or large equity
Refinance your existing mortgage for more than you owe and take the difference in cash. Ideal if current rates are favorable or you have significant equity built up.
Pros
- Single monthly payment
- Access large amounts of equity
- Potentially lower blended rate
- Fixed or adjustable options
Considerations
- –Resets your mortgage term
- –Closing costs 2–5% of loan
- –May increase monthly payment
HELOC
Flexible line of credit against your equity
Typical Amount
$50,000 – $200,000
Rate
Variable · Prime + 0.5–2%
Best for: Phased builds or uncertain final costs
A Home Equity Line of Credit works like a credit card secured by your home. Draw funds as needed during construction and only pay interest on what you use.
Pros
- Draw only what you need
- Interest-only payments during draw period
- Reusable credit line
- Flexible for phased construction
Considerations
- –Variable interest rate
- –Rate can increase over time
- –Requires discipline — easy to over-borrow
Construction Loan
Purpose-built financing for new construction
Typical Amount
$100,000 – $350,000
Rate
Variable during build · 8–10%
Best for: Detached ADUs and larger builds
A construction loan funds your ADU build in stages as work is completed. Once construction is done, it typically converts to a permanent mortgage or is paid off.
Pros
- Designed specifically for construction
- Funds released in draw stages
- Can convert to permanent financing
- Higher loan amounts available
Considerations
- –Higher rates during construction phase
- –Requires detailed plans & budget
- –More complex approval process
Personal / Unsecured Loan
No collateral required
Typical Amount
$25,000 – $100,000
Rate
Fixed · 9–18% typical
Best for: Smaller projects like JADUs or garage conversions
Unsecured personal loans don't require your home as collateral. Approval is based on credit score and income. Best for smaller ADU projects where speed matters.
Pros
- No home equity required
- Fast approval — sometimes same day
- No risk to your home
- Simple application process
Considerations
- –Higher interest rates
- –Lower loan limits ($25K–$100K)
- –Shorter repayment terms
ADU-Specific Programs
Texas & DFW local incentive programs
Typical Amount
Varies by program
Rate
Varies · often below market
Best for: Owner-occupants in qualifying areas
Several Texas municipalities and lenders offer ADU-specific financing programs with favorable terms for owner-occupants. Programs vary by city — we help you identify what's available in your area.
Pros
- Below-market interest rates
- Reduced fees in some programs
- May include forgivable portions
- Designed specifically for ADUs
Considerations
- –Limited availability by city
- –Income or occupancy requirements
- –Slower approval timelines
Your ADU Pays for Itself
A $150,000 ADU generating $1,800/month in rent returns your full investment in under 7 years — then generates pure income for the life of the property.
$1,200–$3,000/mo
Tarrant County
$1,800–$3,200/mo
Dallas County
$1,000–$2,400/mo
Denton County
Common Questions
ADU Financing FAQs
How much equity do I need to finance an ADU?
Most lenders require 15–20% equity remaining after the loan. If your home is worth $400,000 and you owe $200,000, you have 50% equity — more than enough to finance a $100,000–$150,000 ADU project.
Does DFW ADU Pro help with financing?
We don't lend money directly, but we work closely with DFW-area lenders who specialize in ADU construction financing. We can connect you with trusted lending partners and provide the project documentation lenders need.
Can I use rental income to qualify for a loan?
Some lenders will count projected ADU rental income toward your debt-to-income ratio, which can help you qualify for a larger loan. This varies by lender and loan type — ask your lender specifically about ADU rental income.
How long does ADU financing approval take?
Home equity loans and HELOCs typically take 2–6 weeks. Construction loans can take 4–8 weeks due to the additional documentation required. Personal loans can be approved in 1–5 business days.
What documents do lenders need for an ADU construction loan?
Typically: property appraisal, ADU floor plans, contractor license and insurance, itemized construction budget, and your personal financial documents (tax returns, pay stubs, bank statements). We provide all project documentation.
Preferred Lending Partner
Work With a Lender Who Knows DFW
We partner with trusted local lenders who specialize in ADU and construction financing. Gus Moreland at First United Bank is our go-to resource for DFW homeowners.
Gus Moreland
Mortgage Loan Consultant
NMLS# 543335 · 3120 Sabre Dr, Ste 370, Southlake, TX 76092
Apply Online with Gus4.99 ★ rating · 38 verified reviews · First United Bank NMLS# 400025 · Member FDIC
Ready to Talk Numbers?
Call us for a free consultation. We'll walk through your property, your equity position, and the financing path that makes the most sense for your ADU project.