Get CalHFA's $40k ADU Grant Without Refinancing Your Mortgage

Learn more about alternative loans and get started with the application process

May 5, 2023

CalHFA’s ADU grant is drying up, but there’s still time to apply. See what's new and how you can get it.

Looking to apply for the CalHFA ADU Grant Program but you are not sure what’s the best way to do it?

Well, almost a year in and a lot of things have changed.

From the list of lenders continuously growing, to adding non-profits to the mix, CalHFA are doing their best to adapt this program to the homeowners’ needs. And given that $34m of the $100m fund is already disbursed and another $50m are reserved, we believe they are succeeding.

So at this point, you may have heard something about HPP Cares closing their portal and that the only way to apply now is through a loan that can mess up your primary mortgage. But that’s not quite the case.

In fact, we have some great news about a lender that offers a second lien mortgage product, meaning that you won’t have to refinance your current mortgage to get ADU funding.

ADU Grant Program Summary

Since you’re here, you probably heard a lot about this grant already. In short, the California Housing Finance Agency offers a $40,000 grant to homeowners who want to build an ADU. Here are the most important things you need to know about the CalHFA grant:

  • This is a grant, not a loan, so it does not need to be paid back.
  • The funds can only be used to cover pre-construction or soft costs and non-recurring closing costs.
  • Soft costs include site prep, architectural designs, permits, soil tests, impact fees, property survey, and energy reports. For an ADU they typically range from $10,000 - $20,000.
  • Non-recurring closing costs include loan-related costs that are paid only once, such as loan fees or interest rate buydowns. You can use the grant to pay a large amount upfront to buy the rate down and save much more money in the long run.
  • This grant is meant for homeowners, not investors, so you need to own the property where you plan to build the ADU and live in the primary house.
  • To be eligible for the grant, the borrower (not the household) needs to meet the low-to-medium income requirements. The requirements vary for different counties and go as high as $300,000 for some.
  • To get the grant, you first need to go through one of CalHFA’s pre-approved lenders or special financing participants.

ADU Loans That Work With the CalHFA Grant

To work with the grant, the loan needs to have a managed escrow from which the lender pays the contractor as each construction phase of the ADU is completed. However, most lenders only offer loans that require you to refinance your first mortgage.

With refinancing loans, you take out a new mortgage that amounts to more than your current mortgage balance and the difference is paid to you in cash. You can then use those funds to finance your ADU.

But the new mortgage will likely have a much higher interest than your current one, so taking the $40,000 grant can easily turn into an expensive investment.With that in mind, it’s understandable why many homeowners are hesitant about this option.

Luckily, one of the lenders, CalCon Mutual, is offering a 2nd Trust Deed loan. With this loan, you will still be borrowing against your home equity, but it will not affect your primary mortgage.

Calcon Mutual’s 2nd Trust Deed Loan

Here’s what you need to know about CalCon’s second loan:

  • The minimum amount you can borrow is $200,000;
  • The interest rate is around 7.5-8%;
  • You need to have 25-35% equity in your primary house;
  • You need to be working with a licensed General Contractor;
  • There are no prepayment penalties, but you cannot pay off the loan until the ADU is completed and you receive a certificate of occupancy.

How to apply for the grant with CalCon Mutual

If taking out a second loan is a good option for you, then you should consider applying for the grant with CalCon Mutual.

To do so, you need to give them the following information:

  • Your total annual household income;
  • The county your home is in;
  • An estimated value of your house;
  • Total estimated current mortgage balance (how much you own on your current loan);
  • An estimated budget to build the ADU. You can fill out our application form to get started.

Start the process today

We hope that this article helped you learn more about the CalHFA ADU Grant and the financing options that work well with it.

If you are still on the fence, you can try our free calculator and get a personal estimate of your potential monthly payments and APRs in case you opt for this loan.

Start Your ProjectGet A Feasibility Report
Latest Article

Costs of an ADU in 2024: A Comprehensive Guide

Read Article
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Turn Your Unused Space Into a Valuable Asset

We'll help you get started with a feasibility report!

"Dwellito's Site Analysis Report caught a critical code issue that other builders missed. Definitely recommend!" -Nancy H, Bakersfield

Start Your Transformation TodayBrowse ADU Plans →