Industry News

By June Donenfeld

WITH INTEREST IN accessory dwelling units (ADUs) growing and Maine towns and cities loosening zoning restrictions, some local banks are now offering loans that better fit the needs of ADU customers.

We talked with Matthew Le, a vice president with Kennebunk Savings, and Tristin Oldmixon, a vice president with Bangor Savings, about how ADU loans compare to traditional options like refinancing an existing mortgage, home equity lines of credit (HELOCs) and home equity loans.

Both bankers say that a traditional way for a homeowner to access funds for an ADU has been to refinance their mortgage and use their home’s equity. However, the original interest rates on most first mortgages are lower than today’s rates, so refinancing is likely to result in a higher interest rate for the entire mortgage. In response, Kennebunk Savings and Bangor Savings now offer an ADU loan as a second mortgage rather than refinancing. And while a traditional second mortgage typically has a term of 15 to 20 years, both banks give borrowers up to 30 years to pay off their ADU loans.

In addition, traditional loans often depend on the current home value, limiting borrowing to existing home equity. These new ADU loan terms, on the other hand, are pegged to the as-complete value of the planned property, which increases the availability of funds, including those needed for design, permits and construction.

Both banks offer fixed interest rates on their ADU loans, so monthly payback costs are predictable, as well as interest-only payment periods during construction.

This article appeared in the Fall 2024 edition of Green & Healthy Maine HOMES. Subscribe today!

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