ADU Loan Calculator

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.

1. Enter your total ADU project cost in dollars. Use your full build budget, including construction and any related costs you plan to finance.
2. 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.
3. Enter the down payment value. The tool subtracts it from the project cost to find the amount you actually borrow.
4. Enter the annual interest rate your lender quotes. You supply this number, so you can test different quotes by changing it.
5. Enter the loan term in years, then read your results.
6. 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.

What this tool does that others don’t

• It gives you a real number on the page. Several top-ranking ADU loan calculator results advertise a calculator but send you to a separate third-party tool or replace it with a contact and lead-capture form, so you never get a usable figure. This tool returns an estimate instantly, with no signup.
• 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.