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How to Finance Your St Pete ADU: Complete Guide

Updated for 2025 · 14 min read · By St. Pete Tiny Houses

As St. Petersburg, Florida, embraces more Accessory Dwelling Units (ADUs) to address housing needs and boost property values, financing these projects is a key consideration for homeowners. Whether you're adding a backyard cottage for rental income or a space for family, costs can range from $75,000 for a garage conversion to $370,000 or more for a detached unit in 2025.

This guide explores all major financing options available to Florida homeowners, including home equity lines of credit (HELOCs), construction loans, cash-out refinancing, and FHA-backed choices. We'll cover pros, cons, and tips tailored to St. Pete's market, where supportive local policies make ADUs an attractive investment.

Understanding ADU Costs in St. Pete

Before diving into financing, know what you're up against. In St. Petersburg, a basic 800-square-foot ADU might cost $160,000 to $250,000, factoring in permits, materials suited for Florida's climate (like hurricane-resistant features), and labor. Higher-end builds with custom designs or flood elevations can push totals higher.

Strong ROI: ADUs can increase home values by up to 30% and generate $1,500 to $2,500 in monthly rent. Financing spreads these costs, but always factor in interest rates, which hover around 7-9% for many options in late 2025.

Home Equity Line of Credit (HELOC)

A HELOC lets you borrow against your home's equity—like a credit card secured by your property. It's one of the most flexible options for ADU builds in St. Pete, allowing you to draw funds as needed during construction.

How It Works

Approval is based on your home's value minus outstanding mortgage. You might access up to 85% of equity, with a draw period (often 10 years) followed by repayment.

Pros

  • Lower interest rates than personal loans (variable, starting around 8%)
  • Interest-only payments during draw period
  • Tax-deductible interest if used for home improvements

Cons

  • Variable rates can rise
  • Your home is collateral—default risks foreclosure
  • Closing costs add 2-5% of the loan

Best For: Homeowners with substantial equity (at least 20%) who want phased funding. In Florida, where property values have risen, this is popular for mid-sized ADU projects.

Home Equity Loans

Similar to a HELOC but with a lump sum at a fixed rate, this is ideal if you know your exact ADU budget upfront.

How It Works

Borrow a fixed amount against equity, repaid over 5-30 years.

Pros

  • Predictable payments
  • Fixed rates (around 8-9% in 2025)
  • Potential tax benefits

Cons

  • Less flexibility than HELOCs
  • Higher rates if your credit isn't strong

Best For: St. Pete residents planning a straightforward build, like converting an existing structure.

Cash-Out Refinancing

This involves replacing your current mortgage with a larger one, pocketing the difference in cash to fund your ADU.

How It Works

If your home is worth $400,000 with a $200,000 mortgage, you could refinance to $300,000 and get $100,000 cash (minus fees).

Pros

  • Often lower rates than other loans (around 7% for conventional in Florida)
  • One monthly payment
  • Uses current low rates if available

Cons

  • Resets your mortgage term, potentially extending payments
  • Closing costs (2-6%)
  • Possible higher rates if market shifts

Best For: Homeowners with low existing mortgage rates or those consolidating debt alongside ADU funding. In St. Pete's appreciating market, this can unlock significant equity.

Construction Loans

Designed specifically for building, these short-term loans cover construction costs and convert to a permanent mortgage upon completion.

How It Works

Funds are disbursed in stages (draws) as work progresses, with interest-only payments during build (6-12 months). Then, it rolls into a standard loan.

Pros

  • Tailored for new construction
  • Rates around 8-10%
  • Can include land if needed

Cons

  • Higher rates and fees than traditional mortgages
  • Requires detailed plans and inspections
  • Not all lenders offer them for ADUs

Best For: Ground-up detached ADUs in St. Pete, where zoning allows larger units. Pair with a contractor experienced in Florida building codes.

FHA Options for Florida Homeowners

Federal Housing Administration (FHA) loans provide accessible financing, especially for those with lower credit or down payments. In 2025, FHA has expanded support for ADUs.

How It Works

Options include the FHA 203(k) renovation loan for repairs or additions (up to $35,000 for limited, or more for standard), or One-Time Close construction loans for new builds. FHA now allows 75% of projected ADU rental income to qualify borrowers, and updated limits (announced December 2025) increase borrowing power in high-cost areas like Pinellas County.

Pros

  • Low down payments (3.5%)
  • Flexible credit requirements (down to 500 score with 10% down)
  • Government backing reduces lender risk

Cons

  • Mortgage insurance premiums add costs
  • Stricter property standards for flood-prone St. Pete areas

Best For: First-time ADU builders or moderate-income Florida homeowners. Check if your ADU qualifies as a primary residence addition.

Other Financing Avenues

Personal Loans

Unsecured loans based on credit. Quick approval but high rates (10-20%). Good for small projects or supplements.

Renovation Loans

Beyond FHA, conventional versions fund improvements with similar structures. Faster but costlier than equity-based options.

Grants and Incentives in St. Petersburg

St. Pete offers targeted support to make ADUs more affordable:

Affordable Residential Property Improvement Grant Program: Provides a rebate of up to 40% of pre-construction value for eligible improvements, including ADUs, in the South Side Community Redevelopment Area. It's aimed at low- to moderate-income homeowners (up to 120% of area median income) who commit to long-term affordability.

Multigenerational Tax Exemption: Florida's program reduces property taxes on ADU value if housing elderly family members (age 62+).

State Housing Initiatives Partnership (SHIP): May offer further assistance for affordable units.

Steps to Secure Financing

  1. Assess your equity and credit: Get a home appraisal and check scores.
  2. Compare options: Shop rates from multiple lenders, considering Florida-specific factors like insurance costs.
  3. Gather documents: Plans, permits, contractor bids.
  4. Apply: Start with pre-qualification to avoid credit hits.
  5. Close and build: Monitor draws and inspections.

Conclusion

Financing an ADU in St. Petersburg opens doors to income generation and family flexibility, with options like HELOCs, construction loans, cash-out refinancing, and FHA paths fitting various needs. In 2025, with rising property values and local incentives, it's more feasible than ever—but always consult financial advisors to match your situation.

By choosing wisely, your ADU can pay for itself while enhancing your Florida lifestyle. Start by verifying eligibility through city resources today!

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