Why your ADU is worthless

UPDATE 2/20/2023: There is a fintech that uses the future rental income and value of your unbuilt ADU state-wide. Did a video with them here:    • Don't make your ADU WORTHLESS!  

Almost every Accessory Dwelling Unit (ADU) faces the same challenge - lenders and financial institutions think they're worthless when you need them most! Almost every ADU loan has the same weakness that makes it so hard to get financing for the full cost of your ADU... but this new lending product changes the game for thousands and thousands of homeowners looking to develop an ADU.

So while every bank says your ADU is worthless when calculating your loan to value ratio, Redwood Credit Union is offering a construction loan that finances up to 90% CLTV and uses the "as complete" value of the ADU and its potential rental income! This video will explain what that means and why it's important.

This is not sponsored by Redwood Credit Union or the Napa Valley Community Foundation - I just like them and think this loan will be useful to a lot of my audience here on YouTube.

For information about the ADU Construction Loan, contact:
Sean Charter, Assistant Manager - Construction Lending at Redwood Credit Union
Subject: ADU Construction Loan
Sean Charter
NMLS# 911547
[email protected]
Phone: (707) 576-5339 | (800) 609-9009 | Fax: (707) 541-2670
3033 Cleveland Avenue, Santa Rosa CA 95403

Press Release: https://www.redwoodcu.org/about/blog/...

Webinar about the loan:    • Webinar: A New Way to Finance Buildin...  

LOAN DETAILS:
Lender advertises a 4.375% fixed rate 20 year 2nd lien with a 12 month interest only draw and up to 90% CLTV including the value of the future ADU As Complete and its rental income. Must be in one of the eight counties where RCU offers membership (San Francisco, Contra Costa, Lake, Solano, Mendocino, Napa, Sonoma, Marin) and it is only valid on primary residences. Construction loan maximums at RCU are $300,000

VIDEO SUMMARY:
Budgeting the cost of the ADU and figuring out how you're going to pay for it is one of the toughest parts of planning an ADU! And traditional lending products from the big banks don't make it any easier!

Almost all banks treat your future ADU as if it's completely worthless when they're calculating your Loan To Value ratio.

Most homeowners secure large loans against the value of their home in the form of a mortgage, HELOC or any other big loan. And one of the basic measures banks use is to look at your Loan To Value ratio (LTV). The tricky part of building an ADU is that the ADU is not counted toward the value of your property until construction is complete and the property is assessed, so banks don't traditionally count the future value of the ADU or its rental income when calculating the risk of the loan.

There's a good reason we put rules on banks so that they avoid giving people debt that they can't afford, and selling that subprime debt! But ADUs create a unique opportunity for portfolio lenders (like some credit unions or private financing options) to offer a loan that secures the loan during the 9-18 months of construction with cash, and then converts to secure the loan with the value of the completed asset once construction is complete.

The new ADU construction loan is available for projects that fall within RCU's 8 north bay counties of membership. These are Sonoma County, Marin County, Napa County, Mendocino County, Lake County, San Francisco, Solano County, and Contra Costa County. Additionally, at this time it is also limited to builds on a borrower’s principal residence.

Please note that I'm not a lender, a broker, a lawyer, an advisor, a realtor, or anybody else with a license. This video is not about your specific situation, and it is meant for general information only.

MORE RESOURCES:
🏠 Subscribe to this channel: https://www.youtube.com/c/HowToADU?su...
🏠 Video about the Casita Coalition's ADU Finance Guide:    • ADU Finance Guide  
🏠 Link to the Casita Coalition's ADU Finance Guide: https://www.casitacoalition.org/guida...
🏠 More about this Loan:    • Webinar: A New Way to Finance Buildin...  

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