Accessory Dwelling Units, or ADUs, are becoming a popular housing solution across the Cape, where the housing market is tight and rental demand is high.
ADUs can take many forms. There is a lot of interest and momentum in standalone structures, but traditionally they have taken the form of a converted garage or basement apartment. They are fully functional homes with their own kitchens, bathrooms, living areas, and often modest yard space and parking.
ADUs also can be a practical choice for homeowners seeking to maximize their property’s value. An ADU can provide homeowners with a revenue stream; however, there are upfront costs to convert or build the space. The Cooperative Bank of Cape Cod offers financing solutions to help homeowners realize an ADU investment. The right approach depends on your financial situation, project specifics, and long-term goals.
A Home Equity Line of Credit (HELOC) is one of the most popular ways to finance an ADU. It allows homeowners to borrow against the equity in their existing property, offering a flexible and cost effective way to access funds as needed for construction. HELOCs offer flexibility, allowing you to borrow only what you need, when you need it. During what is called the draw period, you may only be required to pay interest on the amount borrowed, holding down initial costs. In addition, HELOCs often have lower interest rates compared to personal loans.
For those who prefer a fixed loan with predictable monthly payments, a home equity loan could be the right choice. With this approach a homeowner receives a lump sum based on their home’s equity, which is then repaid over time at a fixed interest rate. This method is ideal for homeowners who have a clear budget for their ADU project and prefer the certainty of fixed payments.
Another alternative to consider is a construction loan. The Cooperative Bank of Cape Cod offers construction loans tailored to provide short-term financing, covering costs during the building process of your ADU. Once the project is complete, the loan converts to a traditional mortgage or be refinanced into another type of financing, such as a HELOC.
With several financing pathways available, The Cooperative Bank of Cape Cod provides personalized service to help homeowners make informed decisions. Our loan officers are well versed in all aspects of ADU financing and can recommend solutions to fit your unique needs.
Contact The Cooperative Bank of Cape Cod today to explore your options and take the first step toward building an ADU. Whether you’re in the planning phase or ready to break ground, our team is here to help homeowners unlock the potential of their property and contribute to addressing housing needs in our region.
Charlotte Green is First Vice President, Residential Mortgage Sales Manager, NMLS# 994452, at The Cooperative Bank of Cape Cod.
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