How to Finance an ADU in Central Florida (2026)

HELOC, cash-out refi, construction-to-perm, and FHA 203(k) options for Central Florida ADU projects — with Florida tax and insurance implications.

By Andy West Ocala, FL

Financing an ADU is really a home equity question, not a mortgage question. The right option depends on three things about your situation: the interest rate on your current mortgage, how much equity you have in your home, and whether the ADU will generate rental income.

Most Central Florida homeowners who build an ADU in 2026 use one of four options: a home equity line of credit (HELOC), a cash-out refinance, a construction-to-permanent loan, or an FHA 203(k) renovation loan. A smaller number pay cash from savings. Each option has a different interest rate, different fees, different Florida-specific costs at closing, and a different impact on your monthly payment. The difference between options can add up to tens of thousands of dollars over the life of the loan — so this choice matters more than most people assume.

This page walks through each option, the Florida-specific costs that national guides usually miss, the Central Florida lender landscape as of April 2026, worked examples at current rates, and the property tax and insurance changes that catch people off guard later. Last verified: 2026-04-21.

The four financing options

Home equity line of credit (HELOC). A HELOC is a revolving line of credit backed by the equity in your home. You borrow what you need during a draw period (usually 10 years), pay interest only on what you’ve actually drawn, then repay the balance over a set term after that. HELOC rates are variable — tied to the prime rate plus a margin. In April 2026, with prime around 7.5%, Central Florida HELOCs are running 7.5% to 9.5% for well-qualified borrowers.

The main advantage of a HELOC for ADU construction: you draw money as you need it during the build, so you only pay interest on what you’ve actually spent. Your existing mortgage stays untouched — which is a big deal if you have a low rate from 2020–2022 that you don’t want to lose.

The main disadvantage: the rate can go up. If rates rise significantly during your build and repayment years, your monthly payment rises with them.

Cash-out refinance. A cash-out refi replaces your current mortgage with a new, larger one. The difference is paid to you at closing. You use that money to build the ADU. The new mortgage is typically a 30-year fixed loan — in April 2026, Central Florida rates are running 6.75% to 7.25% for well-qualified borrowers.

The advantage: one loan, fixed rate, long repayment period.

The disadvantage — and for most people in 2026, this is a dealbreaker: you give up your existing mortgage. If you have a 3% mortgage from 2021 and you replace it with a 7% mortgage, you’ve just dramatically increased your interest cost on money you already owed. On a $200,000 original balance at 3.5% versus 7%, the extra interest over 30 years is about $215,000. Cash-out refis make sense when your current mortgage rate is already close to today’s rates, or when your loan balance is small enough that the rate gap doesn’t cost you much.

Construction-to-permanent loan (CTP). A CTP is a two-phase loan built for new construction. During the build (typically 6 to 12 months), the lender sends money in stages as work is completed and inspected. You pay interest only on what’s been disbursed. When the project is done, the loan converts to a regular mortgage without a second closing. CTP rates in April 2026 run 8.0% to 8.75% during construction, then lock into a 30-year fixed rate (typically current market plus a small premium) when the loan converts.

A CTP is the right choice when you don’t have enough equity for a HELOC large enough to cover the whole build, and you don’t want to touch your existing mortgage. The main catch: the lender bases your loan amount on the “completed value” of your property after the ADU is built. In some Central Florida neighborhoods without many ADU sales to compare against, appraisers have a harder time estimating that number, which can limit your loan size.

FHA 203(k) renovation loan. The 203(k) is an FHA loan that combines a home purchase or refinance with construction financing. For ADU projects, the “Standard 203(k)” is the relevant version (the “Limited” version caps renovation costs at $35,000 and doesn’t work for a full ADU build). The Standard 203(k) can fund ADU construction up to the FHA loan limit for your county — in 2026, that’s $540,500 in most Central Florida counties.

Rates run 6.75% to 7.5%, plus FHA mortgage insurance — 1.75% upfront and 0.55% per year. The main advantages: only 3.5% down, more flexible credit standards, one long-term loan for everything. The disadvantages: you must use a HUD-approved construction consultant, stricter contractor requirements, more plan review rounds, and you pay mortgage insurance for the life of the loan.

The 203(k) is underused in Central Florida ADU planning because most people don’t realize FHA will finance construction. If you have moderate income and limited savings, and you’re buying or refinancing a home that could work with an ADU, it’s worth looking at seriously.

Paying cash. Paying cash avoids closing costs, Florida origination taxes (see below), and monthly loan payments entirely. The trade-off is opportunity cost — money tied up in the ADU isn’t available for other investments. If the ADU’s return (rental income, family use value, resale value increase) beats what you’d earn investing elsewhere, cash makes sense. One caution: pulling money from retirement accounts to fund a cash build usually isn’t worth it. Early withdrawal penalties and taxes typically cost more than you’d save by avoiding a loan.

Florida-specific costs at closing

National ADU financing guides rarely mention two taxes Florida charges every mortgage borrower at closing. Both sound small in percentage terms; both add real dollars on an ADU-sized loan.

Florida documentary stamp tax. Florida charges 35 cents per $100 borrowed on any loan secured by Florida real estate. On a $200,000 construction loan, that’s $700. On a $300,000 cash-out refinance, it’s $1,050. On a HELOC, Florida charges the stamp tax on the full credit limit at opening — so a $150,000 HELOC costs $525 at closing whether you ever borrow the full amount or not.

Florida intangibles tax. Florida also charges $2 per $1,000 borrowed (0.2%) on new mortgages secured by Florida real estate. On a $200,000 loan, that’s $400. On a $300,000 loan, $600. Combined with the doc stamp, you’re looking at $1,000 to $1,800 in Florida-specific closing taxes on a typical ADU loan — before any lender fees.

Homeowner’s insurance. Adding an ADU means your homeowner’s insurance coverage needs to go up to cover the new structure. In Central Florida in 2026, the added annual premium for a 600–800 sq ft ADU typically runs $1,200 to $2,400 for inland properties, and $2,000 to $3,500 for properties near the coast or in higher-wind areas. Florida’s insurance market has gotten tighter since 2022. Several carriers have stopped writing new policies in coastal counties, or have left Florida entirely. If you’re building in Brevard, Volusia, or coastal Orange or Osceola, get insurance quotes before you close on a construction loan. A surprise in the insurance market after the build can derail your whole plan.

Property tax increase. Florida’s Save Our Homes law limits how much your assessed home value can rise each year (3% or CPI, whichever is lower) on your primary residence. That protection applies to the existing part of your home. A new ADU is assessed at full market value in the year after it’s completed. In Central Florida, that typically adds $1,800 to $4,200 per year to your property tax bill, depending on the county tax rate and the ADU’s value.

The ADU itself falls under the Save Our Homes limit in subsequent years — as long as the property stays your primary residence. One important note: if you rent the ADU to someone who isn’t a dependent, some Central Florida counties treat the rented portion as losing homestead status, which can change the tax calculation. Check with your county property appraiser when you’re ready to rent.

Florida intangibles tax on loan changes. One cost that’s often missed: the intangibles tax also applies when you increase the principal on an existing loan — including when you refinance a HELOC into a larger one, or when a cash-out refi replaces a smaller loan with a bigger one. The tax applies to the increase in balance, not the full new amount. Ask your lender for this number in writing before closing. It doesn’t always appear on the early fee estimate.

Central Florida lenders

The national mortgage brands (Rocket, Chase, Wells Fargo, loanDepot) write standard 30-year loans in Central Florida, including cash-out refis. For construction-to-permanent loans and HELOCs at ADU-project sizes, regional credit unions and community banks are where most Central Florida ADUs actually get financed. The list below reflects institutions actively writing ADU-related loans as of the last verification. Confirm current product availability directly with the institution.

Credit unions. Addition Financial Credit Union (headquartered in Maitland) writes HELOCs and construction loans across the nine-county region. Space Coast Credit Union serves Brevard and Volusia with competitive CTP loans. MidFlorida Credit Union covers Polk, Osceola, and eastern Lake. Fairwinds Credit Union covers Orange and Seminole. VyStar Credit Union writes 203(k) loans and competes well on HELOC rates.

Regional and community banks. Seacoast Bank is a common construction-to-permanent option in Osceola and Polk. Truist writes CTP loans and cash-out refis across the region. Synovus writes construction loans throughout Central Florida. Regions Bank is a consistent HELOC and cash-out option. United Community Bank writes community-scale construction loans.

National lenders. Bank of America, Chase, and Wells Fargo all write cash-out refis and HELOCs on Central Florida properties. None is typically competitive on construction-to-permanent loans at ADU-project sizes — the paperwork overhead at the national level often outweighs the benefit for a loan this size.

Mortgage brokers. Independent brokers shop multiple lenders for the best rate based on your specific financial profile. For cash-out refis and 203(k) loans, a good broker often beats retail rates. For CTP loans, brokers are less consistently useful because those loans are typically held by the lender (not sold on the secondary market), so the bank relationship matters more.

Nothing above is an endorsement. See the disclosure policy for how partner relationships work on this site.

Worked examples at April 2026 rates

The math is easier to see with real numbers. All three examples use a $200,000 ADU project. Florida doc stamp and intangibles taxes are not included — add roughly $1,200 at closing.

Example 1: HELOC on a home with significant equity. The homeowner has $350,000 in equity in a home worth $475,000, with a $125,000 mortgage at 3.5%. A $200,000 HELOC at 8.0% (prime plus 0.5%) funds the build over 6 months.

  • Interest during the build: roughly $4,800
  • Monthly payment after the draw period ends (20-year repayment at 8.0%): roughly $1,673
  • The 3.5% mortgage stays untouched
  • Total interest over 20 years at a stable 8.0% rate: approximately $201,500

This works well precisely because the old low-rate mortgage is preserved. The homeowner only borrows at today’s higher rate for the new ADU money — not for the original loan.

Example 2: Cash-out refinance. Same homeowner, same home. Refinances into a new $325,000 loan at 7.125%, taking out $200,000 cash.

  • New monthly payment (30 years at 7.125%): $2,190
  • Old monthly payment ($125,000 at 3.5%): $561
  • Added monthly cost: $1,629 for $200,000 in ADU funding
  • Total interest on the new loan over 30 years: approximately $463,400

The problem: roughly $323,400 of that total interest comes from re-financing the original $125,000 at a much higher rate. That’s the real cost of the refi — and it never shows up as a single line item anywhere. This is the most common financing mistake in Central Florida ADU planning right now.

Example 3: Construction-to-permanent loan. The homeowner has $225,000 in equity in a home worth $425,000, with a $200,000 mortgage at 6.5%. Not enough equity for a $200,000 HELOC. Uses a $200,000 CTP loan instead.

  • Interest during the 6-month build at 8.25%: approximately $4,950
  • Monthly payment after the loan converts to a 30-year fixed at 7.25%: $1,365
  • Total interest over 30 years: approximately $291,400
  • The 6.5% mortgage stays untouched

When you don’t have enough equity for a HELOC that covers the full build, a CTP is usually the right path.

If you plan to rent the ADU

Rental income changes the math significantly because it offsets part of your monthly loan payment.

Central Florida long-term rental rates for a 600–800 sq ft detached ADU in 2026 typically run $1,400 to $2,200 per month, depending on county and neighborhood. Inside the Orlando metro, rates tend toward the higher end. In Lake, Polk, Marion, and Sumter, expect closer to the lower end.

At $1,800 per month on Example 2 (the cash-out refi), rental income almost exactly covers the $1,629 in added monthly cost — which looks neutral on a monthly basis, but still costs $323,400 more in total interest than Example 1 over 30 years. On Example 1 (HELOC), the same $1,800 rent is strongly cash-flow positive after the monthly payment.

Two tax things worth knowing. First, rental income is taxable on your federal return, but reduced by real expenses — your share of mortgage interest, property taxes, insurance, repairs, and depreciation. Florida has no state income tax, so there’s no state-level hit on rental income. Second, you can depreciate the ADU structure over 27.5 years for tax purposes. On a $200,000 ADU, that’s about $7,270 per year as a paper deduction — which frequently wipes out the taxable income from rents on paper. Note: this depreciation gets taxed back when you sell the property. It’s a delay, not a free pass.

Short-term rentals (under 30 days) are banned in most Central Florida ADU jurisdictions. See the county pages for the specific rule in your jurisdiction. A financial plan built around Airbnb income that your county prohibits isn’t a plan — it’s a liability.

What catches people off guard

HELOC rate increases. A HELOC at 8.0% today could be 10.5% in 18 months if rates rise. Before committing to a HELOC, run the monthly payment at 2% higher than the current rate. If that payment would be a hardship, a fixed-rate loan is the safer choice.

Giving up a low-rate mortgage. Refinancing a 3% mortgage into a 7% cash-out refi is the single biggest financing mistake in Central Florida ADU planning right now. The Example 2 worked numbers above show the true cost — the extra interest never appears as a single line item on any loan document. If your existing rate is below 5%, a HELOC or CTP almost always wins on total interest.

“Completed value” appraisal risk on CTP loans. The lender determines your loan amount based on what your property will be worth after the ADU is built. In neighborhoods where ADUs are still uncommon, appraisers have fewer comparable sales to work from, which can push the appraised completed value below your expected number. Ask the lender for a completed-value estimate before you start construction — not after.

Insurance at the finish line. Some Central Florida homeowners in the last 18 months found that their insurance carrier wouldn’t continue coverage on the completed ADU property at an affordable rate — forcing a carrier switch or a move to Citizens Property Insurance at significantly higher cost. Confirm continuing insurance coverage with your current carrier before framing starts.

Property tax timing. Your county adds the ADU to the tax roll in the year after it’s finished. The first higher tax bill arrives in November of that year. Homeowners who complete a construction loan conversion in October sometimes get surprised by that November bill before they’ve adjusted their budget. Plan for it.

How to shop for the best loan

Three steps, in order:

Get a rate quote for each option you qualify for. A HELOC quote, a cash-out refi quote, a CTP term sheet, and — if it applies — a 203(k) quote. Each quote should include the interest rate, lender fees, estimated Florida closing taxes, and any appraisal or inspection costs. Don’t rely on rate ranges posted on lender websites — your actual quote depends on your credit profile and how much equity you have.

Compare total interest, not monthly payment. The lowest monthly payment is not always the cheapest loan. A HELOC with a lower starting rate but a shorter 20-year repayment period can cost more in total interest than a CTP with a higher rate over 30 years. Total interest over the full loan is the right comparison. Monthly payment is a cash flow question.

Stress-test for rate increases. HELOCs are almost always variable rate. Construction loan rates float during the build. Only a fixed-rate cash-out refi is stable from day one. If a 2% rate increase on a variable-rate option would create a hardship, choose the fixed loan even if the current rate is higher.

Homeowners who work through these three steps make financing choices that hold up. Homeowners who pick the option with the lowest advertised rate frequently discover two years in that it was actually the most expensive.

Primary sources

For cost context, see the costs page and the impact fees comparison. Nothing on this page is financial, tax, or legal advice. Your situation will differ — talk to a licensed Florida financial professional before committing to a route.