How To Finance and Build a Mother-in-Law Suite

Mother-in-law suites have grown in popularity as a way for homeowners to make space for family members without sacrificing a sense of independence or privacy. They also are popular for guests or as a space to rent out on a short-term or long-term basis. But whether you’re finishing off a basement, adding on to your home, or building a stand-alone structure, it’s important before you get started to know how much it’s going to cost, how you’re going to pay for it, and who’s going to build your mother-in-law suite.

6 Ways To Finance a Mother-in-Law Suite

Building a mother-in-law suite can be expensive. As you weigh your financing options, consider whether you plan to offset some of your costs by renting out the unit, either as a long-term rental or using a short-term rental service such as Airbnb.

1. Pay in cash

If you have money available, then you could pay for your mother-in-law unit in cash. This might be an attractive option for homeowners with finished basements, garages, or carriage houses that don’t need much additional work.

2. Personal loan

Personal loans tend to come with lower interest rates than credit cards, but higher interest rates than secured loans like home equity loans or home equity lines of credit. Personal loans also can come with fees that range from 2% to 5% of the total loan amount. Before you take out a personal loan, make sure you have enough room in the monthly budget to afford the payments. This will be an additional monthly payment on top of your mortgage.

3. Home equity loan

With a home equity loan, you can borrow money to build your mother-in-law suite using the equity you have in your home as collateral. A home equity loan is a lump sum that you receive once you close on the loan. Home equity loans come with lower interest rates than personal loans because they are secured by your home, which reduces the risk for the lender. Just know that this means that the lender can foreclose on your home if you can’t keep up with your home equity loan payments.

4. Home equity line of credit

A home equity line of credit — also known as a HELOC — is another type of secured loan that allows you to borrow against your home equity. Unlike a home equity loan that comes as one lump sum, a HELOC is a line of credit you can tap into as needed over a specified amount of time up to a certain limit. Once the draw period ends, you’ll enter the repayment period where you’ll pay back what you borrowed in regular payments.

5. Cash-out refinance

A cash-out refinance allows you to tap into your equity to withdraw cash. With this option, your mortgage will be replaced with a new mortgage with a higher balance. The difference between those two sums is the amount you’ll be withdrawing. Cash-out refinances typically come with lower interest rates than credit cards, but the downside is you’ll be left with less home equity and you may pay more in total interest.

6. Other options

Grants and financial incentives for building an ADU also are available at the state, city, and county levels. For example, California’s CalHFA ADU Grant Program offers up to $40,000 to reimburse homeowners for the predevelopment costs of building an ADU. Eligibility requirements vary depending on the program, city, and state.

How Much Does It Cost To Build a Mother-in-Law Suite?

The cost of building a mother-in-law suite will depend on a variety of factors, including the size, scope, and type of suite you want to build. At a very basic level, the space will need to meet residential building codes for it to qualify as inhabitable. From there, you may also want to add a bathroom and other features depending on its intended use. Here’s a look at some common types of mother-in-law suite conversions:

• Garage conversion. Your garage may already be wired for electricity and have some drywall, but it may need more outlets and sufficient insulation. It already has its own roof and entrance, but you’ll likely need to add heating, air conditioning, and kitchen features. If you want to add a bathroom to your garage, you can expect that to cost an additional $15,000 to $25,000.
  • Typical cost: $5,000 to $50,000.
• Attic conversion. You’ll likely need to add insulation and extend your HVAC and plumbing systems to make the attic a livable space. To meet most residential building codes, you’ll need at least 70 square feet where the ceiling height is at least 5 feet, and a stairway that’s at least 36 inches wide.
  • Typical cost: $41,000 to $90,000.
• Basement conversion. The cost of converting your basement to a mother-in-law suite will depend on whether the basement is already finished. According to HomeAdvisor, refreshing an already finished basement can cost as little as $3,850, but finishing and remodeling a basement can cost as much as $50,000.
  • Typical cost: $12,000 to $33,000.
• Home addition. If you don’t already have enough space inside, then you can build an attachment onto your home to serve as a mother-in-law suite. You can expect home additions to range anywhere from $80 to $210 per square foot, though the total cost can range widely depending on the features you include.
  • Typical cost: $21,000 to $216,000.
• Detached ADU. A detached ADU is a smaller structure on the property that is not physically attached to the main house. While the detached ADU sits separate from the house, it cannot legally be sold on its own.
  • Typical cost: $16,500 to $400,000

“The cost to build a mother-in-law suite will vary depending on whether you are converting a garage versus building a full detached structure with separate utilities,” says Erin Hybart, a Realtor at Clients First Realty in Baton Rouge, Louisiana. “You could convert a garage for $5,000 to $10,000 or less if you do some work yourself. If you build a fully detached structure, you will spend at least $25,000 depending on size, amenities, and separate utilities. Some choosing the detached route could build the structure to function as a rentable ADU in the future, which could increase the project’s cost.”

The cost of a mother-in-law suite will depend largely on the size and accessories added, says Curvin Huber, chief executive officer at The Backyard And Beyond, a company in Ellsinore, Missouri, that builds portable buildings and offers a furnished cabin for functional living. “We can build a bedroom-only mother-in-law suite with a porch for $16,500,” he says. “With a bathroom and kitchenette included as well, our price will end up around $27,500.”

3 Steps To Build a Mother-in-Law Suite

If you’re ready to start building a mother-in-law suite, then here are the steps to take.

1. Choose a plan

Before you start work on your mother-in-law suite, it’s important to have a plan in place to help make sure the project is efficient and economical. You’ll need to decide how much you’re going to handle yourself, and what you’ll hire professionals to cover.

“Choosing a plan will be determined by the building structure. A converted garage will likely have walls, a garage door, electrical, and even a window to work into the design,” Hybart says. “Creating a space without modifying the existing structure will be less expensive. If you are building from the ground up, you will need to consider access to the structure, space available, cost to get utilities to the structure, and any setback limits for the property.”

Be sure to check your local building codes and ordinances in your area so you know what is and is not allowed. You’ll also likely need to obtain a permit to comply with zoning laws, occupancy codes, and homeowners association conditions.

“Considering how the space will be used immediately and how it will function for your loved one in the future is also important,” Hybart says. “You can design around mobility limitations so the space can function if needs change. Also, understanding how the space could be used if the home were sold should be considered. Adding a mother-in-law suite could impact home value or salability in the future.”

2. Find a contractor

The first step to actually building a mother-in-law suite is finding a contractor that specializes in ADUs. You can search this database from the National Association of Home Builders to find certified contractors near you.

“Clearly define the project needs and budget to find a good contractor for your build. If you are financing the build, the lender could have requirements on who does the work,” Hybart says. “Be sure to get that clarity. Research contractors online and in social media groups. Ask around to family or friends for recommendations. Interview each contractor to get a list of references, information on their past and current projects, and copies of licenses and insurance. Develop a detailed and clear scope of work with project timelines.”

When you interview contractor candidates, ask to see samples of their previous work. If you’ve decided to go with a detached ADU, you’ll find that some contractors build the structures off-site in advance.

“For a custom build, the first step would be to stop by our office to discuss what you would like for your building,” Huber says. “We will then stop by your location to check out existing utilities. We will build the structure, including any electrical, plumbing, and HVAC. When you are ready for delivery, we will deliver the building and manage any hookups necessary for the utilities.”

3. Prepare the site

Regardless of the type of mother-in-law suite, you’ll need to make sure the site is prepared before the contractor gets to work. If you’re converting your garage, attic, or basement, this will require clearing and cleaning that space out. If you’re building an addition or detached ADU, you’ll need to clear that land, which may involve additional landscaping work. Once the site is ready, the contractor will be able to get to work.

How Long Will It Take To Build a Mother-in-Law Suite?

The time it takes to build your mother-in-law suite will depend on the size, type, and scope of the project.

“A garage conversion could take a few days to a few weeks if someone is working on it full-time,” Hybart says. “A detached structure will take a few weeks to a few months if it is being worked on full-time.”

“If you would like a finished cabin that is already on our lot, we will deliver it and set it up within two weeks,” Huber says. “For a custom build, the timeframe ranges from two to four months, depending on the time of year.”

Pros and Cons of a Mother-in-Law Suite

Be sure to consider the advantages and disadvantages of adding a mother-in-law suite before making your decision.

FAQ: How To Finance and Build a Mother-in-Law Suite

Here are answers to some common questions about financing and building a mother-in-law suite.

The Bottom Line on How To Finance and Build a Mother-in-Law Suite

Building a mother-in-law suite can add living space that’s private and convenient. Simple plans convert an already finished space into independent living quarters. More expensive plans may involve building an addition or a detached ADU. The good news is that there are several ways to finance a mother-in-law suite, and renting it out can help you recoup those upfront costs and eventually turn a profit. Be sure you know what you want to do, have an affordable way to pay for it, and take the time to hire a trustworthy contractor to complete your project.