Then we have job situations/opportunities. How safe is your job, and what are the chances of a promotion or pay raise in the near future? Maybe your job is not that secure, so is now such a good time to take out a 30-year mortgage? There again, if you are on a clear path to promotion, it may be worth stretching yourself financially at the beginning, knowing that after a year or so, an increase in income could take much of the pressure off you. Have you planned on starting a family in the near future or expanding your existing family? How old is your car, and will it need replacing soon? And finally, don’t forget you need to live. By this we mean the occasional night out, holidays, pursuing a hobby or pastime, etc. These are all factors that need to be considered to establish how much you can afford to borrow. Financing your ADU or PRADU How you choose to finance your ADU or PRADU depends very much on the reason why you are having one built, as we have discussed above. We have identified four main ways to fund the cost of your ADU: • Cash from savings and other investments • Personal mortgage, or combination of savings and a mortgage • Sale proceeds from sale of parent’s property • Mortgage taken out by son or daughter if ADU is for them and titled in their name Cash from savings and other investments Clearly the simplest way to pay for an ADU is with cash, if you have the funds available. However, even if you have the cash, it could still be worth exploring the option of a mortgage or other loan as under certain circumstances, especially if you intend to rent out the ADU, the interest element of the mortgage payments could be subject to tax relief, which would make the money even cheaper to borrow. This would then leave you free to reinvest your savings elsewhere.
Once again, we strongly recommend you speak to an accountant. Personal mortgage, or combination of savings and a mortgage
We don’t all have the spare cash or sufficient savings to pay outright for the construction of an ADU. Either a mortgage or combination of a mortgage with some of your savings can be a viable option. Having recommended you check to see what your borrowing capability will be and the cost of that borrowing, there
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