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 home equity loan or line of credit.
What is a home equity loan or line of credit?
A home equity loan is a lump sum of money that you borrow against the equity in your home. A home equity line of credit (HELOC) is similar to a credit card, in that you can borrow money up to a certain limit and repay it as you wish.
How much can I borrow?
The amount you can borrow depends on the amount of equity you have in your home. You can typically borrow up to 80% of the appraised value of your home, minus the amount you owe on your mortgage.
What are the interest rates?
Interest rates on home equity loans and HELOCs are typically lower than other types of loans, such as credit cards or personal loans. 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 home equity loans and HELOCs. These costs can vary depending on the lender and the terms of the loan.
What are the repayment terms?
Home equity loans typically have fixed repayment terms, while HELOCs have variable repayment terms. Fixed-rate loans have the same interest rate for the entire term of the loan, while variable-rate loans have an interest rate that can change over time.
What are the benefits of using a home equity loan or line of credit to finance an ADU?
There are several benefits to using a home equity loan or line of credit to finance an ADU. These include:
- Lower interest rates than other types of loans
- Flexible repayment terms
- No collateral required
What are the drawbacks of using a home equity loan or line of credit to finance an ADU?
There are a few drawbacks to using a home equity loan or line of credit to finance an ADU. These include:
- You’re borrowing against the equity in your home, which could reduce your borrowing power for other purposes
- You’ll have to make monthly payments, which could add to your monthly expenses
- If you default on the loan, you could lose your home
How do I get a home equity loan or line of credit?
To get a home equity loan or line of credit, 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 home equity loan or line of credit can be a great way to finance it. By comparing different lenders and terms, you can find the best option for your needs.
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!
