The Quick Read: Through select programs, the accessory dwelling unit does not carry your qualification, because an asset-based mortgage is reviewed around documented assets rather than rent. The unit matters to the appraisal, its legal status, and the occupancy category the property falls into, and those three things decide which path fits. Subject to underwriting, the right fit depends on whether your assets cover the loan outright or have to be converted into income.
- On the asset qualifier path, eligible assets must equal or exceed the entire loan amount, and no employment or income is documented.
- On the asset depletion path, eligible assets divided by 60 months become qualifying income, and cash-out is limited to 60% loan-to-value on a principal residence, second home, or investment property.
- The unit must be legal and appraised properly, or it adds little to the file.
- Cash-out proceeds never count as qualifying assets.
What Is the Best Asset-Based Cash-Out Refinance Program for a Property With an ADU?
The best program for your situation is the one that matches how you hold your wealth and how you use the property. Lendmire is a mortgage broker, so it does not write the loan itself. It places files with select wholesale lenders, and the lenders that fit depend on your assets, your credit, and the property.
Start with one question: do your assets cover the loan, or do they have to replace income? If they cover it outright, the asset qualifier path is the cleaner fit. If the loan is larger than your usable assets, or you want cash out at a stated leverage, the asset depletion path is the one with published cash-out limits.
Lendmire’s asset-based mortgage programs are built for cash-heavy, income-light borrowers. Think retirees, people who sold a business, heirs, and households living on a portfolio. Your balances are large and your paycheck is small or missing.
Key Terms Defined
Accessory dwelling unit (ADU): a smaller, independent home on the same lot as a main house. The American Planning Association describes it that way, with its own living, sleeping, cooking, and bathroom facilities.
Junior ADU (JADU): a small unit carved out of the main house that shares cooking or sanitation facilities with it. Most reviewers treat it as part of the main home, not as a second dwelling.
Cash-out refinance: a new loan that pays off the old one and hands you the difference in cash.
Asset qualifier path: the program route where eligible assets, after credit percentages, must equal or exceed the whole loan.
Asset depletion path: the route where usable assets divided by 60 months become monthly qualifying income. That income then carries the housing payment and other debts through a debt-to-income test.
Seasoning: the time money must sit in an account before a lender counts it.
Form 1007: the appraiser’s rent schedule, which estimates market rent for a property.
How Underwriting Treats the ADU, Step by Step
Step 1: The lender picks your path. You are qualified on one path at a time. Your assets, the loan size, and your leverage need decide which one applies.
Step 2: The appraiser classifies the property. The appraiser decides whether this is a one-unit home with an accessory unit or a true two-unit property. That call shapes which comparable sales the appraiser uses.
Step 3: The lender checks legal status. Permits or a final sign-off matter. Local rules decide what is legal, and they differ widely by city and state, so a unit that is legal in one place may not be in another. An unpermitted unit is the biggest source of exclusions.
Step 4: The appraisal values the whole property. The appraised value is what any leverage limit is applied to. On the asset qualifier path, the loan must also be covered by your assets, and the lender sets and does not publish its cash-out leverage. On the asset depletion path, cash-out is capped at a published percentage of the appraised value. An ADU may support a higher appraised value, depending on comps and underwriter review.
Step 5: Your assets are documented. Statements replace tax returns, pay stubs, and employment verification, and the lender reviews the full file.
Step 6: Cash-out is sized. The loan is capped by the leverage limit on the appraised value. Your assets must still carry it.
Appraisal gaps are real. One investor discussion on BiggerPockets describes an ADU appraising at roughly half of its build cost. That is a single anecdote, not a national average. Still, it is a fair reminder that the appraisal, not the construction invoice, sets your cash-out ceiling.
Does the ADU’s Rent Count?
On the asset qualifier path, rent does not carry the file. No income is documented on that path, so there is no rent line to count. Your assets must cover the entire loan.
On the asset depletion path, the derived income from your assets carries the housing payment and your other debts. Whether a lender gives any credit to ADU rent on top of that is lender-specific, and it is not something to assume. Ask before you plan around it.
Here is how the two paths compare through an ADU lens.
| Factor | Asset Qualifier Path | Asset Depletion Path |
|---|---|---|
| How you qualify | Assets cover the whole loan | Assets ÷ 60 months = income |
| Role of ADU rent | None documented | Lender-specific, ask first |
| Cash-out leverage | Set by lender, not published | 60% on all occupancy types |
| Investment property | Not published as eligible | Eligible, 60% cash-out |
| Loan range | Up to $4,000,000 | $125,000 to $3,500,000 |
Agencies handle ADU rent very differently. Freddie Mac says rent from an illegal ADU may not be used to qualify. Agency rules apply to agency loans, not to this program. The legal-status lesson still carries over, because an unpermitted unit weakens almost any file.
Fannie Mae’s appraiser update also notes that on its own loans, the rent schedule must show that the rent applies only to the ADU. That is a good habit on any file. If rent matters to your plan, ask for a separate ADU rent line on the 1007 up front.
Which Assets Count, and at What Percentage?
Eligible assets are counted at a share of their balance. The shares differ by path, so never mix the two tables.
Asset qualifier path:
- Brokerage accounts, certificates of deposit, money market, and savings count at 100%.
- 401(k) and IRA balances count at 90% under age 59½ and 100% at 59½ or older.
- Accounts combine.
Asset depletion path:
- Cash accounts and certificates of deposit count at 100%.
- Securities count at 80%.
- Retirement accounts count at 70% at any age.
- Real-estate equity counts at 60%.
Privately held company stock is not an eligible asset on either path. Founders and shareholders use a different route. They document seasoned proceeds from a sale or conversion, or they hold cash, public securities, and retirement accounts at the percentages above.
Cryptocurrency, precious metals, collectibles, and pledged or borrowed funds are not published as eligible either. The documented route is converting them to a seasoned cash balance in a regulated account. The lender reviews the source of that cash.
Also remember that cash-out proceeds from this refinance never count as qualifying assets. You cannot use the cash you pull out to qualify for the loan that pulls it out.
Which Path Fits Which ADU Situation?
Different ADU setups point to different structures. This table is a starting map, not a decision. Every file is underwritten individually.
| Your situation | Likely fit |
|---|---|
| Live in main house, rent the ADU | Principal residence, either path |
| ADU used by family, you live on site | Principal residence, either path |
| Second home with an ADU | Second home, either path |
| Whole property is a rental | Depletion path only, 60% cash-out |
| ADU not yet built | Refinance after it is built |
| ADU is unpermitted | Resolve permits before applying |
Occupancy sets the category. A house where you live is a principal residence even if a tenant rents the ADU in the back. A property you do not occupy at all is an investment property. On this program, investment property is eligible only on the asset depletion path, and the loan is business-purpose.
Say you own a house with a rented garage apartment, and you live in the main house. That is a principal residence file. The ADU is part of what the appraiser values, and your assets do the qualifying.
Now flip it. Say you moved out of that house and rent both units. The deal is then treated as an investment property. It is then limited to the depletion path and its 60% cash-out ceiling, subject to underwriting. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
If the rent alone covers the payment, you may not need your assets at all. That is a different product, a business-purpose DSCR loan, which qualifies primarily on property-level rental income covering the payment, subject to lender guidelines. Those loans are available only for rentals, not for homes you live in.
Where the General Rule Breaks
An unbuilt or unleased ADU. An asset-based refinance values the property as it stands today. A planned unit adds nothing to the appraisal. If you want to build, fund the build first and refinance after.
An unpermitted unit. This is a frequent source of file trouble, since the unit may be excluded from value and the main house may have to stand alone. Get the permit status straight before you apply.
A JADU. Because a junior unit shares kitchen or bath facilities, many reviewers treat it as part of the main unit. Do not expect a separate rent line or separate value.
A short-term-rental ADU. If you plan to rent the unit by the night, rental income may need separate documentation. 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. On the asset-based path, though, rent is not what qualifies you.
Two or more units, or an ADU on a two-to-four-unit property. Unit counts change how appraisers and lenders classify a property. Fannie Mae, for one, now allows ADUs on two- and three-unit properties only if total dwellings stay at four or fewer, per its appraiser update. That is an agency rule, not this program’s rule. For an asset-based file, ask the lender how it counts units before you spend money on an appraisal.
An owner-occupied property that is about to become a rental. The occupancy change moves the file from principal residence to investment property. That changes the path, the leverage cap, and the loan purpose. Declare the plan honestly at the start.
Privately held stock as your main asset. Convert it through a sale or buyout, season the cash, and then the cash counts at its own percentage.
Seasoning, Credit, and Minimums
Seasoning and statements. On the qualifier path, expect 60 days of seasoning and two months of statements for each qualifying account. On the depletion path, statements must be at least 120 days old at application, plus the most recent statement within 45 days. Funds from the sale of a business, an inheritance, or a legal settlement are excused from that seasoning.
Credit. The qualifier path has a 600 minimum score. The depletion path follows the lender’s matrix, and a first-time investor on that path needs 700. Housing history is 0x30x12, with one 30-day late in the last twelve months considered case by case. Multiple bankruptcies are not eligible. A housing event needs four years of seasoning on the depletion path.
Depletion minimums. Qualified assets must be at least the lesser of $1,000,000 or 1.25 times the loan balance. When asset depletion is your only income, you also need at least $250,000 liquid. If asset income only supplements documented income, up to a 45% debt-to-income ratio, that minimum is waived.
Reserves. On the qualifier path, none are required at or below 75% loan-to-value. Above that, the lender sets them. The depletion path has no published reserve months.
All of these are ceilings and floors, never offers. They apply through select programs, subject to underwriting.
What the Math Looks Like in Practice
Two examples show the shape. The numbers are illustrative, and the lender’s own calculation governs.
Qualifier path. Picture an $800,000 loan on a house with a rented ADU. You hold $330,000 in brokerage accounts, counted at 100% for $330,000. You also hold $300,000 in a 401(k) at age 55, counted at 90% for $270,000. Add $200,000 in savings at 100%. Together that counts $800,000 of usable assets, which equals the loan amount, so you qualify on assets alone. The ADU’s rent never enters the calculation.
Depletion path. Consider a borrower with $1,500,000 in securities and $300,000 in cash. Securities count at 80%, which is $1,200,000, and cash counts at 100%, which is $300,000. That is $1,500,000 usable. Divided by 60 months, it produces $25,000 of monthly qualifying income. That income must then carry the housing payment and your other debts through the debt-to-income test.
For cash-out sizing, the logic is simple. The appraised value times the allowed leverage gives your ceiling. Subtract what you still owe on the existing loan, and the difference is the most you could pull out. On the depletion path, that leverage is 60%. If your balance already sits near that level, there is little cash to take. A weak ADU appraisal can shrink the number further.
When Asset-Based Is the Wrong Tool
Be honest about the limits. Asset-based works for people with large balances and thin paperwork. It is a poor fit in several cases:
- You have strong documented income. A conventional or jumbo loan may fit better.
- You document income through business deposits. A bank statement program is built for that.
- Your wealth is mostly in the property itself. Asset-based programs need liquid, documented assets beyond the home.
- The rent clearly covers the payment on a pure rental. A DSCR loan may be simpler.
Also, if your goal is to build an ADU and you do not yet have the unit, a home equity line may serve you before any refinance. Then you refinance once the unit is finished and legally permitted.
What to Bring
- Two months of statements for each qualifying account on the qualifier path
- Statements at least 120 days old, plus one within 45 days, on the depletion path
- Proof of ADU permits or final sign-off
- A lease for the ADU, if it is rented
- Your current mortgage statement
- Insurance covering both structures
- For a sale or inheritance, documents showing the source of funds
Frequently Asked Questions
Can an ADU’s rent help me qualify on an asset-based loan?
Not on the asset qualifier path, because no income is documented there. On the asset depletion path, your assets are converted into income, and whether a lender credits any ADU rent on top is lender-specific. Ask before you rely on it.
What cash-out limit applies to a property with an ADU?
On the asset depletion path, cash-out is capped at 60% loan-to-value on a principal residence, second home, or investment property. On the asset qualifier path, the lender sets cash-out leverage and does not publish it. Ask for the figure on your file, subject to underwriting.
Does the ADU have to be permitted?
For the best result, yes. Local rules decide legality, and an unpermitted unit may be left out of value or force the main house to stand alone. Resolve permits before you apply, because lenders weigh legal status heavily.
Can I use the cash-out to build the ADU?
The refinance values the property as it exists today, so an unbuilt unit adds nothing to the appraisal. Cash-out proceeds also never count as qualifying assets. Many borrowers fund the build another way and refinance once the unit is finished.
Can I use my private company shares as qualifying assets?
No. The documented route is a sale or buyout converted into a seasoned cash balance, which then counts at the percentage for cash.
Next Step
If you are qualifying on assets rather than income and want to see how the numbers work, Lendmire can help you compare asset-based mortgage options based on your statements, the property, credit profile, leverage, and your goals. Lendmire is a mortgage broker, so loans are placed through select lenders in its network, subject to underwriting and not a commitment to lend. Its consumer mortgage lending is licensed in Alabama, California, Colorado, Florida, Georgia, Indiana, Michigan, Montana, New Mexico, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, and Washington.
An ADU can make a property more valuable and more useful, but it is the permit, the appraisal, and your documented assets that make the loan work.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Bank statement, P&L-only, 1099-only and asset-based mortgages for self-employed and high-net-worth borrowers are arranged through wholesale lenders on primary residences, second homes and investment properties; every file is underwritten by the lender under its program guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
For how equity extraction works on an investment property, see Lendmire’s guide to cash-out refinance on an investment property.
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References
1. American Planning Association — Accessory Dwellings
3. Freddie Mac — ADU Fact Sheet
4. Fannie Mae — Appraiser Update
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Best Asset-Based Cash-Out Refinance Program Right After Buying the Property With Cash · Best Asset-Based Cash-Out Refinance Program With a 40-Year Term
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.