Thinking about adding an ADU in Dana Point but not sure how to pay for it? You’re not alone. Between permits, design, utilities, and construction, the numbers add up fast. In this guide, you’ll see what an ADU typically costs here, how the city reviews ADUs, and the most practical ways to fund your project. You’ll also get a simple step-by-step plan to move from idea to approved financing. Let’s dive in.
ADU basics in Dana Point
Permits, fees, and timing
Dana Point offers a single ADU application and publishes a $5,422 planning fee for ADU permits. Building permit, address assignment, and utility fees are separate. The city targets a 60-day plan-check from a complete submittal. If the city does not act in that time, approval may be deemed. You can confirm the process on the city’s ADU page and submit digitally through the city portal. Review Dana Point’s ADU permit page.
Dana Point also notes ADUs are not permitted as short-term rentals under 30 days.
Coastal Overlay Zone check
If your property sits inside the Coastal Overlay Zone, your ADU follows a different review path under the Local Coastal Program. This can change your timeline, siting, and cost. Confirm your parcel’s status with the Planning Division before you finalize a budget or lock in a loan.
Utilities and connections
Water and sewer service varies by neighborhood. Portions of Dana Point are served by South Coast Water District and others by Moulton Niguel Water District. Each district may assess connections and capacity differently. Start early with your district to get a written estimate. You can view local boundaries using Moulton Niguel Water District’s service area map.
State law also limits certain impact and connection fees, especially for smaller ADUs, and often does not require a separate utility connection for units built within existing structures. See California Government Code §65852.2 for fee and connection rules. Read the state ADU statute.
What an ADU costs here
Costs vary with size, site work, and finishes, but 2024–2025 Southern California ranges often look like this:
- Garage conversion or JADU: roughly $80,000 to $160,000.
- Detached new-build ADU: often $200,000 to $400,000+ depending on size and finish level.
- Reported cost per square foot: about $250 to $450+ per square foot, with smaller units trending higher per foot.
These are market snapshots. Get itemized contractor bids for your property. For regional benchmarks, see industry cost breakdowns from ADU specialists, such as this overview of ADU construction costs.
Funding options that work in Dana Point
Home equity options
- HELOC: A home equity line offers flexible draws during construction and is often interest-only during the draw period. Rates are typically variable, so payments can change. The CFPB explains how HELOCs work and what to weigh. Learn how a HELOC works.
- Home equity loan: A fixed-rate second mortgage with predictable payments. You’ll need enough equity and should compare closing costs.
- Cash-out refinance: Replaces your first mortgage with a larger one and returns cash to you. It can simplify payments, but it may raise your total mortgage amount or extend your term. The CFPB outlines key tradeoffs. See CFPB insights on cash-out refis.
Renovation and rehab mortgages
- FHA 203(k) and FHA updates: HUD expanded FHA policy to let lenders include a portion of expected ADU rental income in qualifying and support ADU construction under certain rehab scenarios. This can help you qualify or increase your loan size if you plan to rent the ADU. Review HUD’s ADU policy update.
- Fannie Mae HomeStyle Renovation and construction-to-perm: These products allow financing for ADU construction within a renovation mortgage or a one-time construction-to-permanent setup when requirements are met. Work with a lender who offers these programs. See Fannie Mae’s ADU guidance.
Construction loans
For ground-up detached ADUs or major additions, a construction loan funds work in draws as it is completed. Many loans convert to a long-term mortgage at completion. Expect inspections, a draw schedule, and different rates during construction. The CFPB explains basics and risks. Understand construction loans.
Grants and local programs
- CalHFA ADU Grant: In recent funding rounds, CalHFA offered up to $40,000 for pre-development and non-recurring closing costs such as plans, permits, and reports. Funding is limited and opens in rounds, so timing matters. Check current status and participating lender requirements. Explore CalHFA’s ADU resources.
Step-by-step financing plan
1) Confirm eligibility and coastal status
Talk to the Dana Point Planning Division to verify your parcel’s coastal status and get the current ADU checklist, fees, and submittal instructions. Use the city page listed above to connect with staff.
2) Build a real budget
Get at least two contractor bids that separate hard costs, soft costs, and utility tie-ins. Ask for line items like site work, foundation, electrical, plumbing, sewer, finishes, and landscaping. Keep a contingency for coastal review or utility upgrades.
3) Check grants before spending cash
If you may qualify for CalHFA funding, review timing and lender rules before you prepay soft costs. Some grants reimburse costs, while others require specific order of operations.
4) Talk to lenders early
Ask a mortgage pro and a construction lender which products fit your scope: HELOC, cash-out refi, FHA 203(k), Fannie Mae HomeStyle, or construction-to-perm. Confirm whether projected ADU rent can count in qualifying based on the program you choose.
5) Lock permits and verify fees
Request a written fee estimate from the city that includes planning, building permit, and address fees. Ask your water and sewer district for written connection estimates. For small ADUs, confirm any state fee limits that apply under Government Code §65852.2.
6) Align lender draws and contractor schedule
Make sure the draw schedule matches major milestones. Clarify inspection timing, disbursement method, and any grant reimbursement steps.
Is an ADU worth it financially?
For many Dana Point owners, an ADU can add living flexibility and long-term value. If you plan to rent the unit, updated FHA and Fannie Mae guidance may help you qualify by counting a portion of projected ADU rent. The best outcomes come from tight budgeting, early lender alignment, and confirming coastal or utility requirements up front.
Ready to map out your ADU path in Dana Point? For local insight, introductions to trusted lenders and builders, and a property-specific game plan, connect with Brandon Halperin.
FAQs
How does Dana Point review ADUs?
- Dana Point uses a single ADU application with a published planning fee and a 60-day plan-check target from a complete submittal. Coastal Overlay parcels follow a different review path.
What fees are limited by California law for ADUs?
- State law limits many impact fees for smaller ADUs and requires proportional fees for larger units, and often no separate utility connection is required for ADUs within existing structures. Ask the city to confirm which limits apply to your unit.
Do I need a separate water or sewer line for my ADU?
- It depends on your district and project type. State rules limit some connection fees and requirements, but each district will assess your specific setup. Get a written estimate early.
Can lenders count ADU rent when I apply?
- Yes, under certain programs. FHA and some conventional products allow a portion of projected ADU rent to count in qualifying when documentation requirements are met.
Will an ADU raise my property taxes in Orange County?
- Typically yes. Your base assessment for the main home remains, and the value of the new improvement is added. Ask the county assessor for parcel-specific guidance once you have cost estimates.
