How to Finance an ADU on Your West Linn Property

November 6, 2025

Thinking about adding an accessory dwelling unit to your West Linn property but not sure how to pay for it? You are not alone. Financing an ADU blends construction timelines, lender rules, and local permits, which can feel complex at first glance. In this guide, you will learn practical ways to fund an ADU, how West Linn and Clackamas County milestones shape draw schedules, and what documents lenders expect. By the end, you will have a clear, local playbook to move from idea to funded build. Let’s dive in.

ADU financing options in West Linn

HELOC: flexible access to cash

A home equity line of credit lets you borrow against your home as needed up to a limit. Draws are flexible and often interest only during the draw period. The process is usually faster than a full construction loan and lines up well with progress payments to your contractor.

Keep in mind that HELOCs commonly have variable rates, and lenders may cap the combined loan-to-value. For large construction draws, some lenders ask to see your permit and contractor bid. To compare costs and terms, start with consumer guidance such as the CFPB’s mortgage and home equity resources.

Cash-out refinance: one loan, predictable payment

A cash-out refinance replaces your current mortgage with a larger one and gives you the difference in cash at closing. The rate may be lower than a construction loan or HELOC, and you get one monthly payment.

Expect full refinance underwriting and an appraisal based on current value. Unless you use a renovation program, lenders typically do not include the ADU’s future value until it is complete. Some lenders may escrow funds or require construction to begin before releasing cash for the project.

Construction or one-close construction-to-permanent loans

Construction loans are designed for building. Funds are released in stages, and many products convert to a permanent mortgage after final inspection without a second closing.

You will provide permits, a detailed budget, a signed construction contract, and a draw schedule. Lenders verify progress with inspections before each draw. Rates are often higher than standard mortgages, and a down payment is common.

Renovation loans: FHA 203(k) and HomeStyle

These programs combine your mortgage and construction costs into one loan for purchase plus build or refinance plus build. They can allow lower down payments, though lender participation varies.

You will submit a renovation plan, cost estimates, contractor information, and permits. Disbursements are typically held in escrow and released after confirmed progress.

Savings or unsecured loans

Savings or personal loans can work for smaller projects. Unsecured loans are faster but usually carry higher interest rates, which makes them less practical for a full ADU build.

Incentives and low-interest programs

Grants, forgivable loans, or low-interest programs may be available at times. Availability changes, so check the City of West Linn Planning and Development Services, Clackamas County, and Oregon Housing and Community Services for current opportunities.

How permits shape your draw schedule

Lenders tie money to milestones. In West Linn, zoning and permit steps happen with the City, while building permits and inspections run through Clackamas County. Confirm current steps and timelines with the City of West Linn Planning and Development Services and the Clackamas County Building Division.

Typical local milestones

Pre-application or zoning check for ADU eligibility
Building permit application submission with plans and fees
Plan review and permit approval
Permit issuance and start of work
Inspections during construction: foundation, framing, rough-in for trades, insulation/energy, and final
Final inspection and occupancy approval

If your property uses septic, coordinate early with Clackamas County Environmental Health for capacity review or upgrades. Utility connections and stormwater management can also affect your schedule.

Mapping milestones to funding

HELOC: Draw as invoices arrive. Some lenders will ask for your issued permit for larger draws.
Cash-out refinance: Funds arrive at closing. You pay your contractor per the contract. Appraised value usually reflects the current home, not the future ADU, unless you use a renovation product.
Construction loans: The lender releases funds at set checkpoints, often at permit issuance, after foundation, after framing and rough-ins, and at final inspection.
Renovation loans: Funds are held and released as inspectors verify completed work.

Sample draw schedules you can expect

Construction loan example with four draws:
- Initial mobilization at permit issuance: 10 to 15 percent
- Foundation and slab: 20 to 30 percent
- Framing plus rough-ins complete: 35 to 45 percent
- Final completion and occupancy approval: 10 to 20 percent
HELOC example aligned to invoices:
- Draw in step with contractor billing, keeping a reserve for surprises. There are no fixed percentages.
Cash-out refinance example:
- One disbursement at closing. You pay per invoice and schedule.

Best practice: keep a construction contingency of 10 to 20 percent to cover change orders and price shifts.

What lenders usually require

Prepare these items early to speed approvals and avoid draw delays:

Signed construction contract with a schedule of values and draws
Detailed plans and specifications
Building permit application or a copy of the issued permit
Contractor license, references, and proof of insurance
Budget with line items and a 10 to 20 percent contingency
Appraisal and, if applicable, an as-completed valuation for construction or renovation loans
Title report showing existing liens
Contractor invoices and lien waivers before each draw
Lender or third-party inspection reports tied to each draw
Final inspection or certificate of occupancy to release retainage

Budget, taxes, insurance, and risk

Valuation and appraisal

For most cash-out refinances, lenders base the loan on your current value. To use the ADU’s future value during financing, you may need a construction or renovation loan that allows as-completed valuation.

Property taxes

After your ADU is finished and finaled, assessed value and property taxes usually go up. For local guidance on timing and valuation methods, check the Clackamas County Assessor.

Insurance

Tell your insurer before construction. You may need builder’s risk coverage during the build and updated coverage afterward. If you plan to rent the ADU, ask about endorsements or landlord coverage.

Utilities and septic

Confirm water, sewer, and power capacity and fees early. If you are on septic, capacity and permit needs go through Clackamas County Environmental Health.

Rental income and underwriting

Some lenders allow a percentage of expected rent to help you qualify, often based on market rent schedules. Policies vary, so verify with your lender.

Project risks and how to manage them

Permitting delays: Build buffer time into your schedule.
Change orders: Use a clear contract and keep a 10 to 20 percent contingency.
Contractor selection: Choose a contractor with ADU and local permitting experience. Verify licensing, references, and lien-release practices.
Cash flow: Match your financing product to your timeline so you are never short mid-build.

Recent ADU code trends and where to verify

Many Oregon cities have relaxed ADU restrictions in recent years, with simpler approvals and changes to parking or owner-occupancy rules. Always confirm the current code and checklists with the City of West Linn Planning and Development Services. For broader state context, visit the Oregon Department of Land Conservation and Development. If you hope to layer in financial help, review programs at Oregon Housing and Community Services and check Clackamas County for any local options.

Your next steps in West Linn

Start with a zoning pre-check to confirm ADU eligibility with the City of West Linn.
Line up a detailed contractor bid and schedule.
If on septic, request a capacity review with Clackamas County Environmental Health.
Speak with at least two lenders about HELOC, cash-out, and construction options. Ask for documentation lists and timelines.
Set a contingency of 10 to 20 percent and budget for utility fees and insurance changes.
Keep permits, inspection reports, invoices, and lien waivers organized for smooth draws and the final appraisal.

Ready to plan your ADU with a clear financing roadmap and a design-forward eye on long-term value? Reach out to Laurie Bornstein Homes for local vendor connections, lender introductions, and thoughtful guidance from start to finish.

FAQs

What is the best way to finance an ADU in West Linn?

The right choice depends on your equity, rate goals, and timeline. HELOCs are flexible for invoice-based draws, construction loans align with inspections and staged funding, and cash-out refinances offer a single fixed payment.

How do West Linn permits affect lender draws?

Lenders often release funds at key milestones such as permit issuance, foundation completion, framing and rough-ins, and final inspection, which follow City and Clackamas County processes.

Will building an ADU raise my property taxes?

Yes, once the ADU is complete and finaled, assessed value usually increases. For local guidance, contact the Clackamas County Assessor.

Can projected ADU rent help me qualify for a loan?

Some lenders allow a portion of expected rent in your debt-to-income calculation based on market rent schedules, but policies vary.

Do I need special insurance during construction?

Most projects benefit from builder’s risk coverage during construction and updated homeowners coverage after completion, especially if you plan to rent the ADU.