Can My Adult Child Take Out a Loan to Help Pay for the ADU on Our Property?

By Buz Artiano, BuildX | August 2026

Watch: The Creighton Family Built an ADU in 98 Days, Here's the Full Story

You've sat down and talked about the costs with your adult child. They have a job and good credit and they have decided they want to go ahead with the building process. The idea seems simple enough. You will use a home equity loan to pay for most of the ADU, and they'll take out a personal loan for the rest of it. Everyone contributes to the project. But then, late in the process, you find out that the part given to them is the part that doesn't close.

My name is Buz Artiano, and I am the founder of BuildX. We've built dozens of ADU projects across Massachusetts, mostly around the South Shore and Plymouth County areas. We are the only team you need. We do the design, permitting, and construction. So we see every phase of a project from the first site visit up until you move in. We evaluate septic constraints, zoning issues, utility connections and the requirements for a permit from the city. Massachusetts allows one accessory dwelling unit by right in single family zoning areas, although municipal building code, health code, and dimensional requirements still apply to every project. You can review the state requirements at mass.gov. Sometimes we have to sit down with a client and discuss budgeting and it can be uncomfortable. Financing is where two-generation ADU projects stall more often than at any other point.

Terry and Kevin Creighton are BuildX clients. We built a 900-square-foot ADU above a garage at their home in Plymouth for their daughter Abby and her partner Raya. The family planned for the couple to pay for part of the costs involved but that's not how it worked out.

You'd assume that we would just share the stories from families who had a good experience with us. We're telling you about the Creightons' project because it went sideways and because Terry Creighton talks about what most families don't realize until after it's happened. They should have gotten a larger home equity loan from the beginning.

Can My Adult Child Actually Get a Loan for the ADU?

Just assume the answer is no and build your budget around that. In a two-generation ADU project, the borrower that a lender approves is the person who owns the land the building will be built on and that's the parent. Your child's credit score isn't the obstacle, but the lack of collateral is.

Terry and Kevin Creighton started the project thinking otherwise, and they had reason to. Their daughter Abby and her partner Raya both work, both have credit, and both wanted to contribute financially in the ADU they were going to live in. Terry Creighton said this: "we had always thought there was a piece where they would need to bridge the gap and we thought perhaps to have more skin in the game, could get a personal loan."

The plan didn't survive contact with a lender. In Terry Creighton's words, "in the end, it is too hard for a 27 year old, even with great credit to secure a personal loan." The amount of money in question was about $60,000. Kevin Creighton applied for the loan instead, and the answer changed. "So everybody wants to loan to a middle-aged guy though. So Kevin had no problem."

We want to be clear about one thing, because the family was. Terry Creighton describes it as a loan the couple "could not secure." That doesn't tell you whether an application was formally declined or whether they just stopped trying once the outcome was clear, and we're not going to ask. What the family is certain about is the outcome. The parents had to carry the costs.

Why Does the Lender Say Yes to a Parent and No to a 27-Year-Old?

The difference is in the collateral, not character. A home equity loan lets you borrow against the equity in your home and then the home itself is used as collateral. That means the lender is underwriting the property alongside the borrower. The plain-language explanation is at consumerfinance.gov. A personal loan is unsecured, and that means there are no assets to back it up. If payments stop, there is nothing for the lender to take.

Here's the part families don't anticipate. The ADU is a permanent improvement to the property the parents own, so the value it makes goes with their deed. A lender reviewing a personal loan application from the adult child is being asked to fund a building the borrower doesn't hold the title to, on land the borrower doesn't own, and there is no lien available against either one. That's why the money has to come from the same property the building is built on. We talk about this during the design stage, before drawings and put into the construction schedule, because a gap in the funding that's found after digging starts is at the worst possible time.

Compared side by side, the two different ways to borrow in the Creighton project weren't close. They differed on what secured the loan, on what a lender could review, and on who would own the finished building.

None of that is a judgment about your child. Abby Creighton and Raya had jobs and they had credit. What they didn't have was an ownership interest in the land the ADU would be built on and that's one problem an unsecured lender can't get past.

What Happens When You Size the Loan to a Guessed Budget?

Three things contributed to the Creightons' shortfall, and all three are avoidable. They figured out a budget before anyone got a cost for the work. Then the ADU had to be moved to another part of the property, which raised the cost. And when the budget shortfall showed up, the only money left was in savings.

Terry Creighton is honest about where the first budget numbers came from: "we had, my husband and I had thought we could do this for maybe two 50 thinking, well, that'll cover inflation." That $250,000 was an amount the couple decided on their own, and the home equity loan was sized to match it.

"Because we didn't take out enough home equity originally thinking we could do it for $250,000, we then had to really rob our savings and pull that together," she says. Abby Creighton had the same problem from the other side: "So I was also concerned about the financial aspect specifically when we realized we needed to move the location of the ADU and that drove up the costs a bit. Um, cause we had like emptied out our savings. So we had to find an additional loan. So that was a little tricky. I think there was a bit there where we're like, I don't know if we're going to make this work."

The Creightons weren't new to construction. Years before they built the main house on the same property for about $150,000, and Terry Creighton said looking at the first ADU quotes as "our first, uh, budget shock, if you will." An outdated reference point can cause more problems than no reference point at all, because it seems like knowledge.

How Much Should You Draw Before Construction Starts?

Draw against the whole project. Terry Creighton's own summary is the sentence to remember: "I wish we had known in the beginning before we took out the home equity, we would have taken out a bigger one, right. But we just didn't know."

If you have to get approval to take out more money it means a second application, a second approval, and a second closing on whatever terms there are on the day you need it, and you have no leverage in that case.

Size the draw against three things:

• The contract price for the whole build, not just the amount you came up with on your own
• The conditions of the property your builder identifies on your specific lot before you sign
• The cushion you would otherwise pull out of savings when something happens

If a builder can't give you a complete price before you sign, that tells you something about the builder, not about your budget.

What Carrying the Loan Means for Parents Who Own Their Home Free and Clear

There's a part to this decision that a spreadsheet doesn't deal with. Terry Creighton says she and Kevin paid off their house at 50 and spent the next 10 years without a mortgage. Putting a lender back on the deed was not just a line item for them. It was a feeling.

"For us the thought of having a bank owned house, own something that we have on our property was really unsettling," she says. "That was the word I think we both kind of landed on. It was a little unsettling." She follows it immediately with the resolution: "we're, we're good with it now."

Neither of them talked about that for a while. "I think we both stressed out a bit over the financial aspects and whether or not it was the right move," Terry Creighton says.

We tell families this ahead of time because the uneasiness is normal and will fade once the building is there and the payments are routine. What doesn't go away is a draw that was too small.

Who Pays the Loan Back After the ADU Is Finished?

In the Creightons' case, the adult children do. Terry Creighton describes it as "kind of like rent to own, they're building equity in it." She's honest about why it works that way: "because we built it for them. So it's not like we've got this kind of money to just build it for ourselves." Two months after they moved in she said that it was "going according to schedule and everything's fine with it."

The couple also saved up their money before construction started: "because Abby and Raya lived with us for several months just to save up the rent money and help put that toward the ADU," Terry Creighton says. That's a real contribution, and is a completely different from a loan from a bank.

We're not going to tell you how to draw up the paperwork on something like this. The Creightons didn't share that information, and we didn't write it all up. We don't give families advice on ownership or repayment issues. We just build. So sit down with your own attorney before you agree to anything with your child that involves equity, title, or money changing hands over years. One thing we can tell you is what a family repayment arrangement isn't. It isn't financing and it doesn't fix a lack of funding, and no lender will count it towards your project.

When Waiting a Year Is the Better Financial Move

We build ADUs so you'd think we would tell everyone to build one. But there are families we tell to wait instead, and financing is the most common reason.

Wait a year and draw once if any of these describe you:

• Your plan will work only if your adult child can get a loan no lender has approved
• The money you need to take out will empty the savings might need for emergencies
• You are not sure you're comfortable with a lien on your paid-off house
• None of those is a permanent no. Every one of them is a reason to wait for a year, get a real price, and go to your lender one time with the correct amount you need. If you're reading this because having enough for the project depends on your child getting approved for the last part, that's the part to test first, before you pay for anything.

Where Should Your Financing Conversation Start?

It begins with a number you didn't come up with. The Creightons' shortfall wasn't because a lender turned down their daughter. It was a budget that was decided on before anyone priced the work. Get the price first, take it to your lender and then let your adult child contribute in ways that don't need a bank's approval.