ADU Loan Calculator
Estimate the monthly payment, total interest, and total cost of financing an accessory dwelling unit (ADU). Enter your project cost, down payment, interest rate, and loan term to see what the build will cost over the life of the loan.
Estimate only, not a loan offer. You supply the interest rate; this tool does not use a live rate feed. It covers principal and interest only, not taxes, insurance, or fees.
Your ADU loan estimate
Financed loan amount $160,000
Monthly payment $1,118.74
Total interest paid $242,748
Total of all payments $402,748
Estimate only, not a loan offer. Principal and interest only.
How to use this calculator
An accessory dwelling unit (ADU) is a second, smaller home on the same lot as a main house, such as a backyard cottage, a converted garage, or a basement apartment. Use these steps to estimate what financing one will cost.
- Enter your total ADU project cost in dollars. Use your full build budget, including construction and any related costs you plan to finance.
- Choose how you want to enter the down payment. Pick Percent if you think in terms like 20 percent down, or Dollar amount if you know the exact cash you will put in.
- Enter the down payment value. The tool subtracts it from the project cost to find the amount you actually borrow.
- Enter the annual interest rate your lender quotes. You supply this number, so you can test different quotes by changing it.
- Enter the loan term in years, then read your results.
- Review the financed loan amount, the monthly payment, the total interest, and the total of all payments. Every figure is an estimate, not a loan offer.
How it works
This calculator treats an ADU build like any standard fixed-rate, fully-amortizing loan, the same math a mortgage or auto loan uses. First it works out how much you actually borrow. It takes your total ADU project cost and subtracts your down payment, whether you enter that down payment as a percent or as a dollar amount. What is left is the financed loan amount, written as P below.
Next it spreads that loan amount across every monthly payment for the full term using the amortization formula:
M = P × r × (1 + r)^n / ((1 + r)^n − 1)
Here P is the loan amount, r is your annual interest rate divided by 12 to get the monthly rate, and n is the loan term in years multiplied by 12 to get the total number of payments. This gives a level monthly payment that stays the same every month. The Consumer Financial Protection Bureau explains that lenders use a standard formula like this so a fixed-rate loan pays off exactly at the end of its term. The same equation appears in OpenStax Principles of Finance and Mathematics LibreTexts, where it is written as the present value of an ordinary annuity solved for the payment. Both forms give the same number.
From there the tool multiplies the monthly payment by the number of payments to get the total of all payments, then subtracts the original loan amount to reveal the total interest, the real price of borrowing.
If you enter a 0 percent interest rate, such as an interest-free family loan or a deferred program loan, the standard formula cannot be used because it would divide by zero. Instead the tool divides the loan amount evenly across the term, so the monthly payment is the loan amount divided by the number of months and the total interest is zero.
You supply the interest rate yourself. The tool does not pull live or current rates, so you can model different lender quotes by changing one number.
Examples
$200,000 ADU, 20% down, 7.5% over 30 years. A 20 percent down payment on $200,000 is $40,000, so you finance $160,000. At 7.5 percent over 30 years (360 monthly payments) the amortization formula gives a monthly payment of about $1,118.74. Over the full term you pay roughly $402,748 in total, of which about $242,748 is interest, because spreading a loan over 30 years adds a large amount of interest on top of the amount borrowed.
$120,000 ADU, $0 down, 0% interest-free loan over 10 years. With no down payment you finance the full $120,000, and a 0 percent rate triggers the zero-interest path. The tool divides $120,000 evenly across 120 months, so the monthly payment is exactly $1,000.00, the total of all payments equals the loan amount at $120,000, and the total interest is $0 because no interest is charged.
$300,000 ADU, $50,000 down, 6% over 15 years. A $50,000 down payment leaves a financed amount of $250,000. At 6 percent over 15 years (180 payments) the monthly payment is about $2,109.64. You pay roughly $379,736 in total and about $129,736 in interest, which is far less interest than a 30-year term would add, because a shorter term pays the loan down faster.
ADU financing options compared: HELOC, home equity loan, cash-out refinance, and renovation loans
Most homeowners pay for an accessory dwelling unit with one of a few loan types, and the right one depends mostly on how much equity you already hold in your home. Equity is the part of your home you own outright: its value minus what you still owe. Two of the most common products borrow against that equity. A home equity line of credit (HELOC) is a revolving credit line you draw from as needed, often at a variable rate that can rise or fall. A home equity loan is a single lump sum at a fixed rate, so the payment stays level for the whole term. Both are secured by your home, which means the lender can foreclose if you stop paying (Consumer Financial Protection Bureau).
If you do not have much equity yet, a HELOC or home equity loan may not lend enough. A cash-out refinance replaces your existing mortgage with a larger one and hands you the difference in cash, while a renovation or construction loan is sized against the home’s expected value after the ADU is built. Each product sets its own down payment and rate, which is why the same project can cost very different amounts depending on the loan you pick (Consumer Financial Protection Bureau). Some city programs and family loans are interest-free, and this calculator handles that 0 percent case directly.
Use this comparison to decide which loan to model in the calculator:
| Choose this when | Good fit for |
|---|---|
| HELOC | You have strong home equity and want to borrow in stages at a variable rate. |
| Home equity loan | You have strong equity and prefer one fixed-rate lump sum with a level payment. |
| Cash-out refinance | You want to fold the ADU into a single new mortgage, often when rates have dropped. |
| Renovation or construction loan | You have limited equity and need the loan sized to the home’s value after the build. |
| Interest-free family or program loan | A relative or city program lends at 0 percent; enter 0 for the rate. |
Whichever product you choose, enter its quoted rate, term, and down payment to see the monthly payment side by side.
How loan term and interest rate change what an ADU costs
Three levers decide what an ADU loan costs you: the loan type, the term (how many years you take to repay), and whether the rate is fixed or variable (Consumer Financial Protection Bureau). The term is the lever most people underrate. A shorter term raises the monthly payment but cuts the total interest sharply, because you borrow the money for less time. A longer term does the opposite: it lowers the monthly payment but adds far more interest over the life of the loan.
The table below shows that trade-off on the same $160,000 financed at a 7.5 percent fixed rate, with each payment computed by this calculator’s amortization formula. Try the same comparison with your own numbers to find a payment you can afford without paying more interest than you need to.
| Loan term | Monthly payment | Total interest | Total of all payments |
|---|---|---|---|
| 10 years | about $1,899 | about $67,900 | about $227,900 |
| 15 years | about $1,483 | about $106,980 | about $266,980 |
| 30 years | $1,118.74 | $242,748 | $402,748 |
The rate matters just as much. A fixed rate locks your payment for the whole term, while a variable rate, common on a HELOC, can move up or down over time (Consumer Financial Protection Bureau). Because this tool uses the rate you enter, you can change one number at a time, term or rate, and watch the monthly payment and total interest respond.
How the amortization formula behind this calculator works
This calculator uses the standard amortization formula that lenders apply to a fixed-rate loan:
M = P × r × (1 + r)^n / ((1 + r)^n − 1)
The three inputs are simpler than the formula looks. P is the principal, the amount you actually finance, which is your project cost minus your down payment. r is the monthly interest rate, your annual rate divided by 12. n is the total number of payments, your loan term in years multiplied by 12. The result, M, is the level monthly payment that pays the loan off exactly at the end of the term (Amortization calculator, Wikipedia).
Here is how the math moves from start to finish:
- Find the principal. Subtract the down payment from the project cost. On a $160,000 financed amount, P is 160,000.
- Set the monthly rate and the number of payments. A 7.5 percent annual rate becomes r = 0.075 / 12 = 0.00625, and a 30-year term becomes n = 30 × 12 = 360.
- Solve for the monthly payment, then the interest. Put P, r, and n into the formula to get M = $1,118.74. Multiply M by n for the total of all payments, $402,748, then subtract P to reveal the total interest, $242,748.
The same equation underpins how mortgage lenders calculate a fixed monthly payment (Consumer Financial Protection Bureau). One case needs special handling. When the rate is 0 percent, r becomes 0, and the formula tries to divide by zero, which has no defined result. The tool switches to a straight-line split instead, M = P / n, so an interest-free $120,000 loan over 10 years is simply 120,000 / 120 = $1,000 a month with no interest.
Will rental income cover the ADU loan payment?
Most owners build an ADU for the rent it can bring in, since a secondary suite can help cover the mortgage on the main home (Secondary suite, Wikipedia). The calculator gives you the one number that decides whether the plan works: the monthly payment. Put it next to the market rent you expect for a unit like yours, in your area. If the rent comfortably clears the payment, the ADU can move toward funding itself. If it falls short, you cover the gap each month.
Be conservative when you make that comparison. The monthly payment here is only principal and interest; it leaves out property taxes, insurance, upkeep, and the months a unit may sit empty between tenants. Build a cushion for vacancy and repairs before you call the unit self-funding, and remember that rent can change while a fixed payment cannot.
Keep the risk in view too. A HELOC, home equity loan, or cash-out refinance is secured by your home, so missing payments can put the property at risk of foreclosure, whether or not the unit is rented (Consumer Financial Protection Bureau). Use the payment from this tool as the floor your rental income needs to clear, then add a margin for everything the loan number does not include.
What the data says
The question behind every ADU loan is not really about amortization. It is whether the rent will cover the payment, or whether you will subsidize the unit out of pocket for years. The data on costs, value, and how owners actually pay helps you size that bet before you borrow.
The payoff can be large. In California, the median appraised value of properties with an ADU rose from $550,000 in 2013 to $1,064,000 in 2023, while properties without one went from $405,000 to $715,000. ADU properties also appreciated about 9.34 percent a year, against 7.65 percent for the rest (Federal Housing Finance Agency (FHFA)).
Most owners pay for that build with money they already have, not a single dedicated ADU loan. Researchers at UC Berkeley’s Terner Center and USC’s Lusk Center for Real Estate found that “most homeowners who have built an ADU have used cash and a mortgage to finance construction, with home equity loans and cash-out refinancing the most common mortgage types” (Terner Center for Housing Innovation, UC Berkeley). That is why a calculator that takes any rate and term beats one tied to a single product.
These quick facts anchor the loan amount and the rent you put against it. They come from a 2021 statewide survey of California ADU owners (Terner Center for Housing Innovation, UC Berkeley):
| Metric | Value |
|---|---|
| Median build cost | $150,000 |
| Median cost per square foot | $250 |
| Share costing under $100,000 | 37% |
| Share costing under $200,000 | 71% |
| Median monthly rent (statewide) | $2,000 |
| Rent range (Central Coast to SF Bay Area) | $1,925 to $2,200 |
| Share used as short-term rental | 8% |
The same researchers found that about two-thirds of owners paid with cash savings and 43 percent borrowed against their home through a HELOC or cash-out refinance (Terner Center for Housing Innovation, UC Berkeley). So the rate and term you enter matter more than the loan’s label.
A few mistakes come up again and again when owners size that loan:
- People often pick a loan type on the headline rate alone, missing the trade-off between a HELOC’s interest-only draw period and variable rate and a fixed loan with full principal and interest from day one.
- A common mistake is to underestimate soft costs such as permits, impact fees, site prep, and utility or panel upgrades that sit outside the construction quote, so the loan is sized too low and the owner ends up writing personal checks by month three.
- People often forget to build a 10 to 15 percent contingency into the amount financed, which leaves no cushion when costs run over.
What this tool does that others don’t
- It shows the math, not a black box. It documents the amortization formula M = P × r × (1 + r)^n / ((1 + r)^n − 1) and cites authoritative sources, so you can understand and verify the result instead of trusting an unexplained number.
- It handles the 0% interest case. Many ADU programs, city loans, and family loans are interest-free or deferred. Most calculators break or ignore this. This tool switches to a straight-line payment so a 0 percent loan still returns a correct answer.
- It accepts the down payment as a percent or a dollar amount. Many competitors force one or the other, making you do the conversion yourself. This tool converts whichever you enter.
- It labels total interest separately from total cost. Some tools mix in rental income, equity, and ROI and bury the core loan numbers. This tool clearly reports the financed amount, the monthly payment, the total interest, and the total of all payments.
Frequently asked questions
How do you calculate an ADU loan payment?
An ADU loan payment is calculated with the standard amortization formula: M = P * r * (1 + r)^n / ((1 + r)^n - 1). P is the amount you finance (project cost minus down payment), r is your annual interest rate divided by 12 to get a monthly rate, and n is the number of years times 12. This calculator does the arithmetic for you and also shows the total interest and total of all payments.
What does this calculator include and exclude?
It calculates the principal-and-interest portion of your loan: the financed amount, the monthly payment, total interest, and total of all payments. It does not include property taxes, insurance, permit and design fees, or maintenance, and it does not estimate rental income or ROI. Add those separately when budgeting your overall ADU project.
Should I enter my down payment as a percent or a dollar amount?
Either works. Choose Percent if you think in terms like 20 percent down, or Dollar amount if you know the exact cash you will put in. The tool converts whichever you enter into a financed loan amount, so the results are the same as long as the down payment is the same.
What happens if I enter a 0% interest rate?
The calculator handles it cleanly. With a 0 percent rate (such as an interest-free family loan or a deferred program loan) it simply spreads the loan amount evenly across the term, so the monthly payment is the loan amount divided by the number of months and the total interest is zero. The standard formula cannot be used at 0 percent because it would divide by zero.
Does this tool use live or current interest rates?
No. You enter the annual interest rate yourself, which lets you model different lender quotes or scenarios. Because rates change daily and vary by lender, credit, and loan type, the calculator stays accurate by using whatever rate you provide rather than guessing a market rate.
What is a typical down payment for an ADU loan?
It depends on the financing type. Many ADU and home-improvement loans look for roughly 10 to 20 percent down, while some HELOCs and cash-out refinances can finance most or all of the cost using your existing home equity. Enter your own expected down payment to see how it changes the financed amount and monthly payment.
What loan terms are common for ADU financing?
ADU loans commonly run from about 10 to 30 years depending on the product. Shorter terms mean higher monthly payments but far less total interest; longer terms lower the monthly payment but increase the total interest you pay. Try a few terms in the calculator to compare.
How is total interest different from total cost?
Total interest is only the extra you pay the lender for borrowing, while the total of all payments is the financed amount plus that interest. This calculator shows both so you can see the true lifetime cost of the loan, not just the monthly payment.
How accurate is this ADU loan calculator?
The amortization math is exact for the inputs you give it, so the monthly payment, total interest, and total of all payments are precise for that scenario. Real-world costs may differ because of lender fees, rate changes on variable loans, taxes, and insurance, so treat the result as an estimate of the loan itself, not a final loan offer.
Sources
- How do mortgage lenders calculate monthly payments? (Consumer Financial Protection Bureau). A fixed-rate payment depends on the loan amount, term, and interest rate, and lenders use a standard formula so the loan fully amortizes by the end of the term.
- 8.3 Loan Amortization (Principles of Finance, OpenStax). Present value of an ordinary annuity solved for the periodic payment; for monthly payments, divide the annual rate by 12 and multiply the years by 12.
- 8.05: Amortized Loans (Mathematics LibreTexts). Amortized loan payment formula using the periodic rate and the total number of payments, with twelve periods per year for a monthly loan.