ADU Financing in New Hampshire: How Families Actually Fund a $300k Build

Most New Hampshire families fund an ADU the same way: they borrow against the equity in the home they already own, using a HELOC, a cash-out refinance, or a fixed home-equity loan. When there isn't enough equity to cover the project, a construction loan built around the finished value of the property usually fills the gap.

A typical NH ADU build runs $275,000–$400,000+ depending on design, so this is real financing, not a credit-card renovation. The good news: a house with room for an ADU is usually a house that has been quietly building equity for years, and that equity is exactly the tool a build like this was made for. Here's how each option works, what it costs you in flexibility, and who each one actually fits — using a $300k build as the running example.

How much equity do you need to start?

Lenders generally let you borrow against a portion of your home's appraised value, minus what you still owe on your mortgage. The exact percentage varies by lender and product, so ask directly — but the practical question is simple: does the borrowable slice of your equity cover most or all of a $300k project? If yes, the equity products below are usually the cheapest and simplest path. If no, skip ahead to construction loans, which are designed for exactly that situation.

Either way, walk in knowing your rules first. An ADU is allowed by right on single-family lots statewide under RSA 674:72, amended by House Bill 577 and effective July 1, 2025 — but your town still sets size caps (though never below the state's 750 sq ft floor), setbacks, and septic requirements, and a lender will want to see that the project is buildable before anyone talks numbers.

Can I use a HELOC to build an ADU?

A home equity line of credit is a revolving credit line secured by your house. You get approved for a maximum amount, then draw only what you need, when you need it — which matches how construction actually gets paid for: a deposit here, a foundation payment there, a big check at rough-in.

• How it works: during the draw period you borrow and repay as needed, typically paying interest only on what you've actually drawn. After the draw period, it converts to repayment.
• The upside: flexibility. If your $300k build comes in at less, you never borrowed the difference. Closing costs are usually modest compared to refinancing.
• The tradeoff: the rate is typically variable, so your payment can move. And discipline matters — an open credit line is only cheap if you treat it like construction money.
• Who it fits: families with substantial equity, a stable budget, and a build they'll pay down aggressively — especially if their existing mortgage has a rate they don't want to touch.

How does a cash-out refinance work?

A cash-out refinance replaces your current mortgage with a new, larger one and hands you the difference in cash at closing. For a $300k ADU, that means one loan, one payment, and the full project budget in hand on day one.

• The upside: simplicity and a fixed payment you can plan around for decades.
• The tradeoff: you're re-pricing your entire mortgage, not just the new $300k. If your existing loan carries a lower rate than today's market, a cash-out refi silently raises the cost of every dollar you already owed. Closing costs are also the largest of the equity options.
• Who it fits: families whose current mortgage rate is at or above today's rates, or who are near payoff and want one clean loan for the whole property — which, after the ADU, is genuinely a different property.

What about a fixed home-equity loan?

A home-equity loan (sometimes called a second mortgage) is the middle path: a fixed lump sum, at a fixed rate, on a fixed schedule, sitting behind your existing mortgage — which stays exactly as it is.

• The upside: your first mortgage is untouched, and the new payment never moves. Budgeting is dead simple.
• The tradeoff: you borrow the full amount up front and pay interest on all of it from day one, even while the money sits waiting for your builder's next invoice. There's no flexing down if the project comes in under budget.
• Who it fits: families who know their number, want payment certainty over flexibility, and are protecting a low-rate first mortgage.

When does a construction loan make sense?

If your equity can't reach $300k — common for younger families or recent buyers — a construction loan changes the math. Instead of lending only against what your home is worth today, the lender underwrites the project itself, often considering what the property will be worth with the ADU on it.

• How it works: funds are released in stages ("draws") as the build hits milestones, typically with inspections along the way. Many versions convert to a standard mortgage when construction wraps, so you finance the build and the long-term loan in one process.
• The upside: it's the option that works when equity alone doesn't. It also puts a second set of eyes — the lender's — on your builder's budget and schedule, which is not a bad thing on a project this size.
• The tradeoff: more paperwork, more lender involvement, and usually higher costs than a simple HELOC. Your builder and your budget will be scrutinized. Choose a local lender who has actually financed ADUs before; this is the product where that experience matters most.
• Who it fits: newer owners with strong income but thin equity, and anyone whose project cost outruns what an equity product will cover.

Can projected ADU rent help me qualify?

Sometimes, yes. Some lenders will count a portion of the ADU's projected rental income toward your ability to carry the loan — which can be the difference between qualifying and not, especially on a construction loan. This varies widely by lender and loan type, so raise it early in the conversation and ask exactly how they treat future ADU rent.

Is borrowing $300k against your house actually a good idea?

Here's the argument that convinces most families: unlike a kitchen remodel, an ADU is a borrowed dollar that goes to work. It can produce rent, house an aging parent, or hold value as a second dwelling on your lot — and a well-built ADU generally adds to what the property is worth, not just what it cost.

Run the caregiving math too. Assisted living in New Hampshire commonly runs $70,000–$100,000+ per year in commonly cited industry surveys. Against that, a $300k build that keeps a parent close, private, and out of a facility can pay for itself in a handful of years — and the building is still standing, still yours, when circumstances change.

What should you do before calling a lender?

Financing follows feasibility. Before anyone pulls your credit, confirm what your town allows: the size cap, setbacks, septic capacity, and parking rules for your lot. Every covered town has a plain-English breakdown in our town guides — start with a county page like Hillsborough, or jump straight to towns like Concord or Derry — and bring that summary to your lender along with a real builder's estimate, not a guess.

The money is rarely the obstacle people fear it is. Equity built the down payment on your life; an ADU is how you put it back to work.