As more and more people look to add affordable housing to existing land, Finance of America Mortgage LLC, (FAM) has launched new loan product that will enable homeowners to refinance loans used to build accessory dwelling units to take advantage of current ultra-low interest rates.
The new refinance option will be available to some borrowers who have both a primary mortgage and a secondary mortgage for an ADU, colloquially called “in-law suites” or “granny flats” which can either be attached to the main property or detached, such as a guest house.
According to research by Freddie Mac, there were about 1.4 million ADUs across the country in 2019, with half of those units residing in four states: California, Florida, Georgia, and Texas.
“We recognized a need to help increase access to new housing in areas that have increased density, as well as assist homeowners who wish to leverage that garage or section of land to generate additional income,” said Bill Dallas, President of FAM. “The demand for ADU development will continue to grow, especially as the pandemic has shifted housing preferences and more cities adopt ADU-friendly zoning changes. We’re ready to help expand access to this cost-effective way for homeowners to enhance their properties and make the dream of homeownership more attainable for the modern family.”
In September, the Biden Administration and HUD announced a plan to create 100,000 additional affordable homes across the country in the next three years. A separate report from the HUD suggested one way to add additional units to preexisting areas that are built-out is to change zoning codes to allow ADUs, citing examples of what California and Washington have instituted over the last few years.
“We pride ourselves on being leaders in innovative product development and are constantly exploring new ways to provide flexible options and fill gaps in the market,” said Kathryn Amor, the Chief Product Officer for FAM. “This unique opportunity will serve borrowers with conforming loan amounts and allow borrowers to potentially utilize some ADU rental income to qualify. It also builds on the company’s diverse suite of lending solutions and compliments our recent expansion into home improvement financing.”
According to FAM, homeowners can now build an ADU, and then potentially refinance the costs of that unit with by consolidating the ADU financing with their primary mortgage. The ADU refinance option is available nationwide through all of FAM’s lending channels and applies only to single-family, primary homes. FAM is the mortgage originations subsidiary of Finance of America Companies Inc.