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What Can I Afford
A Homeowner’s Guide to Financing a Tiny Home or ADU
If you’re thinking about building a Tiny Home or an Accessory Dwelling Unit (ADU) on your property, one of the first—and most important—questions to ask yourself is: What can I afford? Understanding your budget, financing options, and long-term goals is crucial to making your project a success.
Whether you're adding a unit for family, generating rental income, or planning for aging in place, this guide breaks down the financial side of the Tiny Home / ADU journey. Each of these loan options offers unique advantages depending on your age, equity position, and long-term goals. Consulting with a loan specialist familiar with ADU and Tiny Home financing is key to finding the right fit.
Find Out How
Understanding the Total Cost of Building a Tiny Home or ADU
Before you apply for a loan or hire a contractor, it’s essential to get a full picture of the total costs involved. Beyond the structure itself, costs often include:
Site Preparation
Grading, excavation, or clearing landUtility Connections
Water, sewer, gas, and electricityPermits and Inspections
Local zoning and building code complianceFoundation Work (For ADUs)
Concrete slabs or raised foundationsDesign and Architecture Fees
If customization is neededAppliances and Finishes
Flooring, cabinetry, and built-insFor a permanent ADU, total costs typically range from $100,000 to $250,000+, depending on location, size, and complexity. A Tiny Home on Wheels (THOW) may cost less upfront, typically between $50,000 and $120,000, but there may still be costs associated with delivery, utility hookups, and site placement.
Evaluating Your Financing Options
Once you understand your budget range, the next step is to explore financing. Here are the three most popular loan options for homeowners financing a Tiny Home or ADU using their home equity:
Home Equity Loan
This loan allows you to borrow a lump sum against the equity you've built in your home. It comes with fixed interest rates and predictable monthly payments, ideal for those who want stability and a clear repayment schedule.Each of these options has different qualifications, rates, and structures—so it’s important to consult with a loan advisor who specializes in ADU and Tiny Home financing.
How to Estimate What You Can Afford
When calculating what you can afford, don’t just look at your loan pre-approval amount.
Factor in:
- Monthly Cash Flow: Will you have new rental income or utility bills?
- Long-Term Plans: Is this unit temporary, or will it serve a permanent purpose?
- Tax Impacts: Will the unit raise your property taxes or qualify for deductions?
- Maintenance and Insurance: New units mean new costs.
A simple way to get started is to use a loan affordability calculator or request a free consultation with an ADU loan specialist.
The Benefits of Smart Budgeting
By taking the time to understand your budget and financing options upfront, you’ll avoid common setbacks like project delays, underfunding, or overspending. More importantly, you’ll be able to move forward confidently knowing your investment aligns with your lifestyle, your property goals, and your financial future.
Knowing what you can afford is not just about numbers—it’s about peace of mind. Whether you’re planning a cozy backyard cottage, an income-generating unit, or a comfortable place for aging parents, smart planning starts with knowing your financial limits and making informed choices.
Flexible Financing for Your Tiny Home / ADU Dream
Unlock your property's potential with our flexible tiny home / ADU loan options. Apply now and turn your vision into a reality!