Massachusetts Launches Second-Mortgage Program Funding ADUs Up to $250,000

Financing has long been the wall between a permitted ADU plan and an actual foundation poured. Massachusetts just knocked it down with a fixed-rate second-mortgage program that puts up to $250,000 into the hands of eligible homeowners ready to break ground on a detached accessory dwelling unit.

The Healey-Driscoll Administration and MassHousing opened the statewide ADU loan program to applicants on March 18, 2026, after MassHousing first announced the initiative in January. The loan product carries a 5.25% fixed interest rate and amortizes over 20 years, structured alongside additional funding at zero percent interest with deferred repayment terms. That paired structure lowers the effective borrowing cost and allows homeowners to access larger overall loan amounts without, as the program materials put it, "burdening them with excessive debt."

The funding caps break down by project type: detached ADUs are eligible for up to $250,000 in construction financing, while ADUs built within the envelope of an existing home top out at $150,000. Both project types are supported, whether the unit sits tucked behind the main house or carved from an existing garage or basement.

"Homeowners want a clear, affordable path to build an ADU, and financing is often the biggest hurdle," said Lieutenant Governor Kim Driscoll. "By offering fixed-rate second mortgages of up to $250,000 through trusted community lenders, we're helping more families move from plans and permits to construction. ADUs can support multigenerational living, help seniors stay close to family and create new rental opportunities in communities statewide."

The program is designed specifically for low- and moderate-income homeowners who typically can't access the home equity financing that wealthier owners use to fund ADU builds. Nationally, HELOCs have dominated ADU construction financing, but they require substantial existing equity and carry variable rates. MassHousing's product offers a fixed rate and higher combined loan-to-value limits than most HELOCs currently provide.

"MassHousing's new ADU loan program serves the needs of moderate-income Massachusetts families, by providing a fixed-rate second mortgage product at a lower interest rate and higher combined loan to value limits than are currently available through a home equity line of credit," said Mounzer Aylouche, Vice President of Homeownership Programs at MassHousing. "We thank our statewide network of community lenders for their work to quickly stand up this new program, and we are excited to begin helping local families construct new housing units."

Loans are being delivered through MassHousing's network of partner community lenders across the state, though MassHousing has not published a full list of participating institutions.

The ADU loan is one piece of a broader campaign Governor Maura Healey launched in December 2025. That package also includes a design challenge intended to produce replicable, no-cost ADU blueprints for homeowners and communities, plus a $10 million technical assistance program administered by the Massachusetts Housing Partnership to accelerate predevelopment work before construction begins.

The policy runway for all of this was cleared by the 2024 Affordable Homes Act, which legalized ADU construction in single-family zoning districts statewide. Before that legislation, adding a second unit to a single-family lot was a regulatory tangle in most Massachusetts municipalities. The shift is already showing results: the Executive Office of Housing and Livable Communities reported more than 550 ADU approvals in just the first six months of 2025.

Specific income eligibility thresholds and a complete list of participating community lenders are expected to be available through MassHousing directly.