Financing Your ADU in City Heights

Build an Accessory Dwelling Unit in 30 days with financing starting at 2.9%!

Accessory Dwelling Units are quickly becoming a must have in the backyard of City Heights homeowners looking for an affordable rental property or a residence for a family member. With rents in some City Heights neighborhoods topping $2000/ month…an Accessory Dwelling Unit (ADU) is a great way to earn money while helping ease a housing shortage in California.

Help a family member or generate rental income!!!

Many family members are bringing aging parent’s home to a separate new accessory dwelling unit aka “tiny home” or granny flat…as a means to reduce the cost of an assisted living center which can top $6000/ month in some areas.  Having an aging parent living next to family has shown to have other benefits besides reduced cost…like healthier and happier parents.   PREFABRICATED ADUs are built faster and for less!!!  USModular, Inc., the leading builder of prefab buildings in City Heights…can build an ADU in as little as 30 days once permits are issued.  Less time means less disruption to your family and neighborhood and faster income.  We have many designs ranging from 480 to 1200 sq ft. that meet City Heights, CA ADU requirements.



USModular  prefab ADUs aka granny flats can be built to Local or Federal building code.

Recent State and local laws have made it easier and cheaper to build an Accessory Dwelling Unit in Encinitas, as permits, fees and parking requirements have been reduced…making it easier and cheaper to build. Can you use extra income? Do you have a family member or friend that needs a nice place to live?  If so let USModular, Inc. help you build an Accessory Dwelling Unit in your backyard. Visit our website, email or call today to learn if a prefab ADU is right for you.  Is a ADU built to local or Federal code your best option? What are the rules and regulations of building a granny flat where you live?

Most people underestimate the cost of building a granny flat in City Heights and are disappointed when they discover they can’t convert their garage for $20,000.

ADUs/ Granny flats come with all the same expenses as building a brand new home, but without the ‘cheap’ square footage like extra bedrooms or hallways to offset the expensive square footage, like the kitchen and bathrooms. Plus, there are a lot of fixed costs to building a home regardless of how big that house is.

Although prefabricated construction makes it easier to build your ADU there still is a lot of work to answer the questions to create an ADU that meets your needs and the local requirements.


One of the biggest questions is financing your ADU/ Granny Flat

Here are at least 5  ways to finance a ADU/granny flat in City Heights:

  1. Your Bank Account

If you can afford to pay for things out of investments or a bank account   this is the easiest and quickest way to finance your granny flat. However, because of the expense of a granny flat, this isn’t an option for a lot of homeowners. Most homeowners who build a granny flat have to borrow money to finance their project. Even if you do finance, you’ll have to pay something out of pocket so expect to tap into savings for your project regardless.

Ok, so what are the loan options for ADU/ granny flats in City Heights?

  1. Home Equity Line of Credit (HELOC)

A home equity line of credit allows a homeowner to borrow money from a lender where the collateral is the borrower’s equity in his or her house before any improvements are added. Typically, homeowners must have at least 10% equity in their home or 20% if an investment property or second home.

A Home Equity Line generally has $500 or less in Lender Fee’s. Depending on the equity in your home a Lender may only require a drive by appraisal (never start any construction work until AFTER you have your loan)

Essentially, a lender agrees to lend to a maximum amount and a timeframe; then you can use your home equity line of credit like a credit card and only pay interest on your average daily balance owed. A typical Home Equity Line (HELOC) is for 25 or 30 years and the first 10 years is a draw period with interest only payments. After 10 years your monthly payment requires principal and interest payments to pay off your loan in full at maturity.

If you default on your loans, your home will be foreclosed on. HELOC’s are usually used for significant life expenses like medical bills, education or, you guessed it, home improvements. It’s not uncommon for a bank to want an appraisal done on the house before granting a loan.

Let’s say your home is appraised by the lender at $550,000 and your mortgage balance on your 1st mortgage is $300,000. At 90% of the appraised value you have $495,000 mortgage lien capacity. This would give you a $195,000 Home Equity Line for whatever use you want to use the money for. ($550,000 value x 90% = $495,000 – $300,000 1st mortgage)

If you have equity in your home, this is the next most straightforward way to finance a granny flat. This method is a common way to finance a granny flat. It allows a homeowner to leverage the value in their home, making improvements, which will lead to an increased value in the property.

  1. Home Equity Loan

A Home Equity Loan provides a homeowner with a fixed amount of cash and a set repayment schedule. Like a HELOC, the collateral is your home. A HELOC is structured as a revolving line of credit. A revolving line of credit gives funds to someone when needed. Here, the amount needed can fluctuate from month to month. This will have shorter repayment terms and only charge you interest on the amount a homeowner has withdrawn.

So, if your HELOC allows you access to 170K, but you’ve only pulled out 20K, you’ll just be charged interest on the 20K.


  1. How to Finance with a HomeStyle Renovation Loan in City Heights

This mortgage loan program will help if you have limited equity in your current property, or are purchasing another property that needs improvements that you can finance it into the financing before the work is started.

The Home-style Renovation mortgage provides a convenient and flexible way for borrowers considering home improvements to make repairs and renovations with a first mortgage, rather than a second mortgage, home equity line of credit, or other more costly methods of financing.

A single loan for financing the mortgage, repairs & upgrades, based on the As-Completed value of the home.

Renovation costs are limited to 75% of the “As-Completed” appraised value of the home and may include:

  • Labor and materials
  • Property inspection fees
  • Architectural or engineering fees
  • Independent consulting fees
  • Permit and licenses
  • Other documented fees including fees for energy reports, appraisals, review of renovation plans, feasibility studies, etc.
  1. How to Finance a Granny Flat in City Heights with a Cash-Out Refinance

This option allows you to refinance your current mortgage for more than you owe and take the difference out in cash. The most common reason for a cash-out refinance is to pay for home improvements.

You have been dutifully making your mortgage payments, accruing equity in the home and paying off your loan. Now, you have equity in the home and still owe 200K on your mortgage.

You decide with low mortgage interest rates to refinance your mortgage for more than you currently owe.

Since you need 100K to finance your project, you refinance your mortgage and take out a new loan of 300K. This allows you cash out 100K.

Should You Do a Cash-Out Refi? This could be a good option if: 

  • Interest rates have dropped substantially since the last time you financed your home.
  • You intend to stay in your home for several more years.
  • You have available equity to provide the cash-out option.
  • You can shorten your loan term.

It’s important to weigh the benefit of how you’re going to use the money against the amount of time it will take to pay off the loan. For instance, you may be able to get a better interest rate, but it will also extend the number of years needed to pay back your loan. Renting out your granny flat will generate revenue that will allow you to pay your loan off more quickly, but keep in mind that future rental income will not qualify you for a mortgage loan.

Before you do a Cash-out Refi, answer these questions:

  • How many years until the end of the term of your current loan?
  • How long is the term of the new loan?
  • Are interest rates lower than your current financing?
  • How much cash do you need?
  • What’s the monthly payment amount?
  • What’s the effect on your taxes?
  • What’s the total cost of borrowing?
  • What’s your break-even point

Todd Kesseler, President ,   USModular says ” As you can see ADU/Granny Flats are a great option for many homeowners looking for a place of a family member to live or a rental unit.  But it is a process and the  our   designers, engineers and financing professionals at USModular Inc can help determine the best size, code and financing that will best suit your needs.”

For more information on building a Accessory Dwelling Unit/granny flat in City Heights contact USModular, Inc.


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