Start With the Project Type
A $60,000 basement conversion and a $325,000 detached cottage do not need the same financing conversation. Decide whether you are pricing a conversion, a new detached build, or a phased project before you compare products.
Common Financing Paths
Homeowners commonly consider HELOCs, home equity loans, cash-out refinances, renovation loans, construction loans, and personal cash reserves. HELOCs can be simple when equity is strong. Construction loans can fit larger detached builds but usually require more documentation and draw management.
Grants and Public Programs
Colorado has created state-level ADU support programs tied to local jurisdiction compliance and affordability goals. Availability, eligibility, and funding change over time, so homeowners should treat grants as a possible bonus rather than the core plan unless a program is confirmed for their situation.
ROI and Rental Income
Rental income can help offset financing costs, but rent projections should be conservative. Include vacancy, maintenance, insurance, property tax effects, utilities, management time, and local rental rules before assuming the ADU pays for itself.
How to Prepare for Lenders
Before applying, gather mortgage balance, estimated home value, household income, credit profile, rough project scope, and target budget. The ADU quiz helps organize those basics so your first lender or builder conversation is less scattered.
Start with the ADU quiz. It captures your property type, goals, budget range, and readiness questions so the next step is focused. Take the ADU readiness quiz.