Zilker Mortgage Broker: Financing a Second Unit Under Austin's HOME Rules
Zilker homes generally trade above $1 million, and much of that price is land: small lots beside Zilker Park and Barton Springs, a few minutes from downtown.
Austin's HOME code changes in 2023 and 2024 changed what that land can hold. Most single-family lots in the city can now carry up to three housing units, and the minimum lot size for a new lot dropped to 1,800 square feet. In a neighborhood where the lot is the expensive part, adding a unit is often the most valuable decision an owner can make.
The financing for that decision is different from a standard mortgage, and it depends on which of four paths you take.
Buying or refinancing in Zilker? We shop your file across a panel of wholesale lenders.
Path one: buy a house and add a unit later
The most common Zilker plan. You buy the existing bungalow and build a backyard unit or a second home on the lot afterward.
The purchase is an ordinary mortgage. It is underwritten on the property as it stands today, at its current value.
The addition is financed separately, usually with one of three tools:
A home equity line or second lien draws on equity you already have. Texas caps total borrowing against a homestead at 80% of its current value, which limits this option for a recent buyer.
A cash-out refinance replaces the first mortgage. If your existing rate is well below today's, this is usually the most expensive way to raise the money, because it reprices the entire balance.
A renovation or construction loan is underwritten on the value after the unit is built. This is often the only structure that raises enough, because the new unit is what creates the equity to borrow against.
Path two: buy and build in one loan
Some renovation programs can finance the purchase and the construction of an accessory unit together, sized on the after-completion value. One closing, one loan, and you are not paying rent on a construction loan while the first mortgage is also due.
The requirements are heavier: a licensed contractor, detailed plans and a bid, an appraisal based on those plans, and draws paid out as work is inspected. Start the plans before you write the offer, not after.
Path three: buy a property that already has two units
A Zilker lot that already carries two homes is financed as a two-unit property, which has real advantages when you live in one of them:
The conforming limit is higher for two-to-four-unit properties than for a single-family home, so more of the purchase can stay out of jumbo pricing.
Rental income from the other unit can count toward qualifying, typically a percentage of the market rent to allow for vacancy.
Owner-occupant down payments apply, which are well below investor down payments on the same property.
Check how the units are held. Many Austin two-home lots are condominium regimes, where each home is a separately owned unit — financed as a condo, not as a duplex. Our East Austin page covers that structure in depth.
Path four: split the lot
The smaller minimum lot size makes it possible to split some lots and sell or finance each piece separately. The process runs through the city's subdivision review, and until the new lot is recorded, no lender can treat it as a separate parcel.
Financing a split is sequential: acquire, subdivide, then finance or sell each new lot. Buyers who assume they can finance the future lot at purchase are usually disappointed.
Two things that override the city code
Private deed restrictions. Some Zilker subdivisions have recorded restrictions limiting a lot to one residence. City zoning does not cancel a private restriction, and a title commitment will show it. Read it before you pay for plans.
Trees and the creek. Protected trees, the critical root zones around them, and setbacks from waterways can shrink a buildable area well below what the lot size suggests.
Taxes in Zilker
A Zilker address inside the City of Austin carries the City of Austin, Travis County, Austin ISD, Austin Community College and Central Health rates — generally around 1.8% to 2.1% of assessed value combined.
A new unit raises the assessment. Budget the added value into taxes and escrow before the build, not after the first bill.
A rental unit is not a homestead. The homestead exemption applies to the part of the property you occupy.
Verify the parcel with the Travis Central Appraisal District.
Where people buy
The streets closest to the park, south of Barton Springs Road, carry the original 1930s to 1950s bungalows and the highest land values per square foot.
Toward South Lamar, the stock mixes cottages with recent two-unit rebuilds and small modern homes on narrow lots.
Condominiums and townhomes along Barton Springs Road and South Lamar are the lowest entry point, and carry the condo-approval questions covered on our South Congress page.
To the south, Barton Hills shifts to 1960s ranch homes on larger, wooded lots.
The neighborhood
Zilker takes its name from Andrew Zilker, whose land along Barton Creek became the core of Zilker Park — about 350 acres of lawns, trails and gardens south of Lady Bird Lake.
Barton Springs Pool is the park's centerpiece, a spring-fed pool that holds a near-constant temperature through the year and is home to the endangered Barton Springs salamander. The park hosts the Austin City Limits Music Festival each fall, and the Zilker Holiday Tree — a historic moonlight tower strung with lights — each December.
The Zilker Botanical Garden and Umlauf Sculpture Garden sit along the park's edge, and the Barton Creek Greenbelt trailhead begins at its southwestern corner.
Not sure which fits? Compare every loan program we place.
Frequently asked questions
How many homes can I build on a lot in Zilker? Under Austin's HOME changes, most single-family lots can hold up to three housing units, subject to site limits, trees, setbacks and any private deed restrictions on the subdivision.
How do I finance building an ADU in Austin? With a home equity line, a cash-out refinance, or a renovation or construction loan based on the value after the unit is built. The last is often the only option that raises enough, because the new unit creates the equity.
Can rental income from a second unit help me qualify? When you buy a two-unit property and live in one unit, a percentage of the other unit's market rent can usually count as income. Rules for accessory units on single-family properties are narrower and vary by program.
Is a two-home lot in Austin a duplex or a condo? It depends on how it is recorded. Many are condominium regimes where each home is a separately owned unit, which is financed as a condo rather than as a two-unit property.
Can I finance the new lot before a lot split is approved? No. Until the subdivision is recorded, the new lot does not exist as a separate parcel, so it cannot be separately financed.
What are property taxes in Zilker? A typical City of Austin address in Austin ISD carries a combined rate around 1.8% to 2.1% of assessed value. A new unit raises the assessed value.
Plan the unit before you plan the offer
In Zilker, the second unit often decides whether a purchase pencils. Send us the address and what you want to build, and we will lay out which path finances it and what it does to the payment.
Start your application · Run the numbers · Call 737-347-1314
Looking at a property in Zilker?
Send us the address and we will model the real payment — taxes, insurance and HOA included — before you write an offer.
Nearby Areas
Nearby & Related