Chapter 04 · The Investment

You probably don't need cash on hand.

Most California families build with equity they already have. We don't lend directly, but we work with two specialized ADU lenders, and most clients tap a HELOC, construction-to-permanent loan, or cash-out refi. Here are the four real paths, the monthly payment math, and an honest decision matrix.

4

real financing paths

$1,007

entry P&I per month

3–6

weeks to close a HELOC

2

specialty ADU lenders

Entry P&I = Four Fifty at $180K, 20% down, 30-year fixed at 7.5% APR

Four Real Financing Paths

Most Common

HELOC

A Home Equity Line of Credit lets you borrow against the equity you already have. Flexible draw, interest-only payments during construction, only pay for what you use. Most of our clients pick this when they have a sub-5% primary mortgage they don't want to refinance.

  • • 7.5–9.5% APR (variable, 2026 ranges)
  • • 3–6 weeks to close
  • • Interest-only payments during build
  • • Tax-deductible interest if used for home improvement

Construction-to-Permanent

A single loan that funds construction in stages, then automatically converts to a 30-year fixed mortgage. One closing, one rate lock. Often the lowest long-term monthly payment.

  • • ~7.25% fixed (2026 ranges, varies)
  • • 6–10 weeks to close
  • • Single closing, no later refinance needed
  • • 80% LTV maximum typical

Cash-Out Refinance

Refinance your existing mortgage for more than you owe; take the difference as cash. Works only if your existing rate is similar to current rates; bad idea if you locked sub-5% in 2020–2021.

  • • Same rate as a new primary mortgage
  • • 4–8 weeks to close
  • • Higher closing costs ($5K–$15K)
  • • Resets your amortization clock

Specialty ADU Lender

Mason Mac and SearchLight Lending underwrite differently: they look at the ADU's projected rental income as part of your debt-coverage ratio. Often approves clients turned down by traditional banks.

  • • Construction-to-perm products
  • • Rental income counted in qualification
  • • 4–6 weeks to close typical
  • • We make the email introduction

Monthly Payment Scenarios

What your monthly payment actually looks like.

Across our 14 models, assuming 20% down, 30-year fixed at 7.5% APR. Real-world P&I numbers. Add ~$200–$600/mo for property tax and insurance to get your all-in monthly cost.

Model Price (all-in)* P&I / mo
Four Fifty $180K $1,007
The 405 $237K $1,326
Five Five Five $267K $1,494
Six Sixty $287K $1,605
Six Sixty 2BR $309K $1,728
Seven Forty-Nine $347K $1,941
Eight Eighty-Five 2BR $377K $2,109
Nine Forty-Five 2/2 $412K $2,305
Nine Forty-Five 3/2 $434K $2,428
Twelve Hundred $507K $2,836
Twelve Hundred U $557K $3,116

*Includes a permitting budget, not final permit costs. Permits and property-specific site work (septic, retaining walls, etc.) vary by property and are confirmed in your feasibility study.

Run the ROI calculator to model your specific down payment, rate, and term, including HELOC and construction-loan scenarios.

Which Path is Right For You?

A decision matrix based on real client situations.

Your Situation Best Financing Path
Sub-5% existing mortgage + significant home equity HELOC: don't touch the existing mortgage
6%+ existing mortgage + significant equity Compare cash-out refi vs HELOC (refi may make sense)
Want a fixed payment forever, no surprises Construction-to-permanent loan
Borderline DTI or turned down at traditional banks Specialty ADU lender (Mason Mac / SearchLight)
Planning to rent the ADU for income Specialty ADU lender: they count projected rent
Lots of cash, prefer no debt Pay cash, maybe keep a small HELOC for tax-deductible interest

Our Lending Partners

Two lenders who actually understand ADUs.

No referral fees. We route clients to Mason Mac and SearchLight because they perform, not because we get paid for the introduction. You're free to use your own lender, your existing bank, or pay cash. Our team will make the email introduction when you know which model fits your property.

Mason Mac

Cynthia Holthouse

ADU-specialized lending. HELOC + construction-to-permanent products designed specifically for California ADUs. Underwrites based on combined LTV of main home + completed ADU.

Often approves clients turned down at big banks. We've routed dozens of clients to Cynthia; her team understands ADU permits and timelines.

SearchLight Lending

Alex Salmoun

Construction and renovation financing for California homeowners. Construction-to-perm products with rental-income consideration. Loan-to-cost products that can fund up to 100% of an ADU project for qualifying borrowers.

Strong for clients planning to rent the ADU. They factor projected rental income into qualification, often making the difference for borderline approvals.

What Lenders Look For

Qualification checklist for an ADU loan.

  1. 01

    Credit score 680+

    720+ for the best rates. Below 680, options narrow significantly.

  2. 02

    DTI under 43%

    Or up to 50% with rental-income consideration from a specialty lender.

  3. 03

    80% CLTV maximum

    Combined loan-to-value (main home + ADU) under 80% for most products.

  4. 04

    2+ years employment

    Stable W-2 income or 2 years of self-employment tax returns.

  5. 05

    2-6 months reserves

    Liquid savings equal to several months of total mortgage payments.

  6. 06

    Framework First contract

    Signed contract with all-inclusive price*, build timeline, and model: exactly what underwriters want documented.

*Includes a permitting budget, not final permit costs. Permits and property-specific site work (septic, retaining walls, etc.) vary by property and are confirmed in your feasibility study.

Financing FAQ

The questions that come up most.

Does Framework First lend directly?
No, we're a builder, not a lender. We partner with two California-licensed specialty ADU lenders (Mason Mac and SearchLight Lending) and can make the email introduction. You're also free to use your own lender, your existing bank, or pay cash.

What's the most common way clients pay for their ADU?
A HELOC against the existing primary home. Most California homeowners we work with have enough home equity to cover an ADU build through a Home Equity Line of Credit, which keeps their existing low-rate primary mortgage in place.

Do I need 20% down?
For a HELOC: no, it's a credit line against equity you already have. For a construction-to-permanent loan or cash-out refi: typically 20% down or 80% combined loan-to-value. Some specialized ADU lenders may go higher.

Will rental income from the ADU count toward my approval?
Traditional banks usually require 12+ months of documented rental history before counting it. Specialty ADU lenders (Mason Mac, SearchLight) factor projected rental income from comparable units into your debt-coverage ratio at application, which often makes the difference between approved and not.

How long does the financing process take?
HELOC: typically 3 to 6 weeks from application to close. Construction-to-permanent: 6 to 10 weeks (more underwriting scrutiny). Specialty ADU lenders are usually in the 4 to 6 week range.

What if I can't qualify for the full build cost?
A few honest options: (1) pick a smaller model (Four Fifty Studio at $180K qualifies for far smaller financing than a 1,200 ft² model); (2) larger down payment to lower the loan amount; (3) co-borrower to bring additional income into qualification; (4) pause to improve credit or income. Your price locks in once you finalize your design in the ADU Designer.

Can I use a 401(k) loan or other retirement funds?
Yes, many of our clients have done exactly that. A 401(k) loan to yourself can be a useful piece of the funding stack (the 'interest' you pay goes back into your own account). Talk to your CPA about the tax implications first.

What happens if interest rates change during my build?
HELOCs are variable, so your rate floats with Prime. If rates rise during construction, your interest-only payment rises with it. Construction-to-permanent loans typically lock the rate at closing (before construction begins), so the permanent-phase rate is fixed when the home is complete. We talk through this when you're picking financing.

See Your Numbers

Estimate your monthly payment in seconds.

The ROI calculator computes financing, rental ROI, and equity scenarios for any of our 14 models. Plug in your zip code and we'll pre-fill median rent.

Open the ROI Calculator → Request a Lender Intro
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