Accessory dwelling units (ADUs) are becoming increasingly popular in Montgomery County, MD. These units can provide extra living space for family members, guests, or renters, and they can also be a source of additional income.
If you’re considering building an ADU, you’ll need to find a way to finance it. One option is to use a construction loan.
What is a construction loan?
A construction loan is a short-term loan that’s used to finance the construction of a new building or the renovation of an existing building. These loans are typically used for projects that take less than a year to complete.
How much can I borrow?
The amount you can borrow depends on the cost of the project. You can typically borrow up to 80% of the cost of the project, minus the amount you have in your savings.
What are the interest rates?
Interest rates on construction loans are typically higher than interest rates on traditional mortgages. However, interest rates can vary depending on the lender and the terms of the loan.
What are the fees?
There are typically closing costs associated with construction loans. These costs can vary depending on the lender and the terms of the loan.
What are the repayment terms?
Repayment terms for construction loans can vary from 1 to 5 years. The term of the loan will depend on the length of time it takes to complete the project.
What are the benefits of using a construction loan to finance an ADU?
There are several benefits to using a construction loan to finance an ADU. These include:
- You can borrow the money you need to build your ADU all at once
- You don’t have to pay interest on the loan until the project is complete
- You can use the money for any purpose, including financing the construction of an ADU
What are the drawbacks of using a construction loan to finance an ADU?
There are a few drawbacks to using a construction loan to finance an ADU. These include:
- You’ll have to pay closing costs, which can add to the upfront cost of financing your ADU
- Your monthly payments will increase, which could add to your financial burden
- You’ll be locked into a fixed interest rate for the term of the loan, which could mean higher interest payments if interest rates rise
How do I get a construction loan?
To get a construction loan, you’ll need to apply with a lender. The lender will assess your creditworthiness and determine how much you can borrow. Once you’re approved for a loan, you’ll receive the funds and you can begin construction on your ADU.
If you’re considering building an ADU, a construction loan can be a great way to finance it. By comparing different lenders and terms, you can find the best option for your needs.
Here are some additional things to consider when financing an ADU with a construction loan:
- The cost of construction: The cost of building an ADU will vary depending on the size, location, and features of the unit.
- Your credit score: Your credit score will affect the interest rate you’re offered on a loan.
- The terms of the loan: The terms of the loan, such as the interest rate, term, and fees, will affect your monthly payments.
It’s important to do your research and compare different financing options before you choose one. By taking the time to understand your options, you can find the best way to finance your ADU and get the most out of your investment.
UP Craftsmen
Call Us: (240) 478-5475
Email: info@upcraftsmen.com
Maryland Home Improvement Commission
MHIC License #0151386
Visit our website to start an ADU Feasibility Study or call us 240-478-5475 today to learn more about our ADU services. We look forward to hearing from you!
