Banks That Offer a Bank Statement HELOC for an Accessory Dwelling Unit

The Quick Read: Few big banks write this product. The lenders that do are mostly specialty and portfolio lenders, which a broker can reach, and they size the line on the equity in the existing home, not on the ADU you plan to build. Deposits are reviewed in place of tax returns, and the finished ADU’s rent usually plays no part in qualifying.

• The ADU is not the collateral. The line is secured by the existing home and sized on today’s value.
• Bank statements change how income is documented. They do not change the equity test.
• Leverage depends on occupancy. An investment-property line on Lendmire’s network tops out at 70% CLTV.
• A DSCR loan is the product that underwrites rent. A HELOC underwrites the borrower and the equity.
• Eligibility depends on the lender, the property, and a full file review.

Which Banks Offer a Bank Statement HELOC for an Accessory Dwelling Unit?

Few depository banks do. A bank statement HELOC is a niche product, and one renovation-finance education site describes these lines as not super common. Large retail lenders mostly price HELOCs off tax returns, W-2s and pay stubs.

The lenders that write statement-based lines are usually portfolio lenders. A HELOC is a second lien that lenders often keep on their own books, so each lender sets its own rules. That is why a deposit-based documentation path can exist at all.

Lendmire is a mortgage broker, not a lender. It works with a network of wholesale HELOC lenders and matches a scenario to a program. The lenders that write this depend on the property, the credit profile, the leverage you need, and how your income is documented. No single list of banks answers the question, and a list would go stale as programs change. The better first move is a file review that shows which program the equity and documentation actually fit.

Two availability points matter up front:

• Lendmire’s HELOC placements run in 16 states: AL, CA, CO, FL, GA, IN, MI, MT, NM, NC, OH, PA, TN, TX, VA and WA. That is narrower than Lendmire’s 41-market DSCR footprint.
• Whether a particular file can qualify on deposit-based income, instead of a tax-return path, is decided by the individual lender’s program and a full file review. Lendmire’s own parameters are built around debt-to-income. Bank statements are one way to document the income side, where the applicable program allows it.

For a related look at how deposit-based documentation works on an equity line, see Lendmire’s piece Banks That Offer a Bank Statement HELOC Without traditional Income Documentation.

Key Terms Defined

HELOC: A home equity line of credit is a revolving line secured by your home. You draw against it as needed, up to a set limit.

Bank statement HELOC: A HELOC where income is documented from deposit history, usually business and personal statements, in place of tax returns. It is reviewed on documented income under the applicable program, subject to lender guidelines.

ADU: An accessory dwelling unit is a second, smaller residence on the same lot as a main home. Examples are a backyard cottage, a garage conversion, or a basement apartment.

CLTV: Combined loan-to-value adds the first mortgage and the new line together, then divides by the property value.

Draw period: The stretch when you can borrow against the line, usually paying interest only. A repayment period follows, with principal and interest.

DSCR: Debt service coverage ratio. It divides a property’s monthly rent by its monthly PITIA. It measures rent against the payment and nothing else.

How Underwriting Treats It, Step by Step

1. Equity sizing. The lender takes a percentage of the current value of the home and subtracts the first mortgage. What is left, under the CLTV cap, is the room for a line. The ADU does not add to that value. An Urban Institute paper on ADU financing notes that when an ADU is funded with a cash-out refinance, home equity loan or HELOC, the appraisal reflects the property without the ADU. The line is sized on today’s home, not the finished build.

2. Credit review. The program pulls a single-bureau score keyed to the primary wage earner, and the report can be no more than 90 days old at closing. The floor depends on occupancy: 600 on a primary residence, 640 on a second home, and 700 on an investment property.

3. Income and debt ratio. This is where bank statements come in. A lender that accepts deposit-based documentation reviews deposits for consistency, overdrafts and seasonality, and may ask for a profit and loss statement. The network’s debt-to-income ceiling is 50%, dropping to 45% for credit profiles from 600 to 679. A ratio above 45% requires at least a 680 score. The payment is qualified on the interest-only amount at the maximum draw, so the test runs against the full line, not just what you plan to draw first.

4. Valuation. Lines at or below $500,000 ordinarily run an automated valuation with no traditional appraisal, though a higher CLTV may require a secondary valuation. A full appraisal is required above $500,000, and you can request one in any case.

5. Title and vesting. The borrower holds title as an individual or through a revocable living trust. Per lender program requirements, LLCs, corporations, partnerships, and irrevocable, blind or land trusts cannot hold title. A property already deeded to an LLC needs a vesting change first, or a different product.

6. Property eligibility. Single-family homes, 2-4 units, PUDs, townhomes and condominiums (including non-warrantable) are eligible. Manufactured homes, co-ops, condotels, log homes, and commercial, mixed-use or agricultural-zoned properties are not.

Notice what never appears: projected ADU rent. A HELOC looks at the borrower and the existing home.

What the Line Can Look Like by Occupancy

Occupancy sets the ceiling. The same equity gives a different line depending on how the property is used. The figures below are the typical limits on Lendmire’s HELOC network, subject to lender guidelines.

Those are ceilings, and the table shows only the top tier. A primary residence at 700+ is limited to 75% CLTV on a line up to $750,000, or 85% on a line up to $500,000. Lower credit tiers step down further. A line above $500,000 is primary-residence only, needs a 700 score or better (720 on the longer-draw structure), caps at 75% CLTV, and requires a full appraisal.

One education site reports that HELOC limits commonly run 80–85% of value minus the first mortgage. That is a market-wide figure. On Lendmire’s network, an investment line stops at 70% CLTV no matter how much equity the property holds.

Run the percentages on a home with a first mortgage at 50% of value. An investment line at 70% CLTV leaves room for a line of about 20% of value, before the $500,000 cap and valuation. A primary residence at 85% CLTV (700+, up to $500,000) leaves room of about 35% of value. The calculator on the page turns those percentages into dollars as an illustrative estimate.

Texas adds a state wrinkle. A Texas primary residence is a homestead and caps at 80% combined, so the upper tiers never apply there. Other states carry their own rules as well, which is another reason the file review matters.

Draw Structure and the Construction Timeline

A HELOC fits phased construction on paper, but the network’s structure needs a closer look. Two draw structures exist on primary residences and second homes. One has a 3-year interest-only draw and a 17-year fully amortizing repayment. The other has a 5-year draw and a 25-year repayment. Investment lines run the 5-year draw and 25-year repayment structure only.

The catch for ADU builders is that at least 75% of the line is drawn at closing. Pricing floats during both the draw and the repayment period and never converts to fixed. So the line is not a pay-as-you-build account. Most of the money is borrowed on day one, and interest runs on it while the build proceeds. Later draws carry a minimum, typically $1,000, with Texas at $4,000, where the program states one.

Compare that to the general description of a HELOC. The CFPB’s explanation of a HELOC describes an open-end line you can borrow against repeatedly, with a draw period that could last 10 years, for example, followed by repayment, and notes that some plans require a minimum or initial draw at setup. Terms differ by lender, so the draw schedule is a question to ask before choosing a program.

Builders who plan to pay contractors in milestones should check this before signing. If the ADU budget is smaller than 75% of the line, the borrower carries unused borrowed money. If the budget is larger, the extra equity may not be available at all.

Where the General Rule Breaks

Occupancy and renting out the ADU. The ADU’s future rent does not qualify the borrower, and the line terms may restrict rental use. The CFPB’s HELOC booklet warns that renting out your home may be prohibited under the terms of a credit line. Read the line’s terms before assuming an ADU can be rented. If you plan to rent it from day one, tell the broker so the file is placed as an investment property, with the 700 floor and 70% CLTV ceiling.

Thin equity. Recent buyers often hit a gap between borrowing power and the cost of the ADU. RenoFi, a renovation lender that sells its own products, points to this gap on newer purchases. A line sized on today’s value cannot lend against value that does not exist.

Unusual structures. The network does not offer HELOCs on manufactured homes or log homes. Barndominiums are not offered on its DSCR programs either. A prefab unit that is classed as manufactured housing can therefore stall a file.

Exposure caps. A borrower is limited to three lines, with combined exposure capped at $2,000,000 on the higher-leverage program and $750,000 on the longer-draw one. A borrower with more than 15 financed properties is not eligible. Investors with larger portfolios should check this early.

Listed properties. In NC, PA, TN, TX and WA, a property that is listed for sale, or was listed within the past 60 days, is ineligible.

Permit and legal status. The guidelines do not hand down a blanket rule on ADU permits. It is a file-review question, and an unpermitted unit invites questions on the value, the insurance, and the property description. Sort it out before you apply.

A frozen or reduced line. A line can be frozen or reduced under its terms, and whatever has been drawn remains owed either way. At least 75% of the line is drawn at closing here, so most of the money is already in hand, but the contract language still deserves a read.

Choosing Between a HELOC and the Alternatives

The ADU investor usually weighs four paths. Each underwrites something different.

The Urban Institute reports that mortgage products financed a minority of ADUs. In a California sample of permitted-ADU owners, 43% used mortgage products, and 56% of that group used a HELOC or home equity loan. The rest relied on savings, personal loans and other short-term sources. The sample is from one state, so it is not a national share.

A HELOC leaves the first mortgage in place. A cash-out refinance replaces it. If the existing mortgage is one you want to keep, the HELOC protects it. If you would rather consolidate, a refinance may suit better.

A DSCR loan is a different tool. It is a business-purpose loan for investment property that qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Select programs start at 1.00 coverage, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 does not mean positive cash flow, because repairs, vacancy, management and capex sit outside the calculation. On a DSCR cash-out, most of the network tops out around 75% LTV on standard rentals, with about 6 months of seasoning as the common expectation. That route fits once the ADU is built, rented and documented, or when the unit is part of a rental property the investor already holds. Lendmire’s complete DSCR loans guide covers those mechanics in detail.

What the Decision Looks Like in Practice

Picture a self-employed owner with strong deposits, modest taxable income, and a home with a first mortgage at about half of its value. A HELOC lets that owner fund the ADU without touching the first mortgage. The cost is variable pricing, a line mostly drawn at closing, and a home pledged as collateral. The CFPB notes you could lose the home if you cannot repay, and that you generally must pay the line off in full if you sell.

Now picture an investor who holds the property in an LLC. The HELOC is not available while the LLC holds title. A DSCR cash-out on the rental, or a deed change, is the route to compare.

Questions worth asking any lender or broker before applying:

• Does the program accept statement-based income, and how many months of statements does it review?
• Is the line first lien or second lien, and does it leave the current mortgage in place?
• How much of the line is drawn at closing?
• Is the draw structure interest-only, and for how long?
• Does the line carry restrictions on renting the ADU?
• What CLTV cap applies to my occupancy and credit tier?
• Does the property type, vesting and permit status fit the guidelines?

Short-term rental rules can vary by city, county, HOA and property type, so investors should confirm local rules before relying on projected rental income from an ADU.

If you are considering a home equity line and want to see how the numbers work, Lendmire can help you compare HELOC options based on the property, the equity available, credit profile, combined leverage, and your goals. Reach the team at 828-256-2183 or request a quote.

The ADU boom has made the equity-versus-rent distinction the one that matters, because a line sized on today’s home pays for a unit that will earn rent only after it is built.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and real estate investors in its 16 full-service states. Home equity lines of credit are arranged through wholesale lending channels; Lendmire brokers the line and the lender underwrites each application under its occupancy-based guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. RenoFi – Bank statement HELOC

2. Urban Institute – ADU financing

3. RenoFi – ADU financing

4. CFPB – What is a HELOC

5. CFPB – HELOC booklet