How to Pay for an ADU
Massachusetts now has a state loan program built specifically for this. Here is what it lends, who qualifies, and what the alternatives look like.
We build ADUs. We do not lend money, broker loans, or take a referral fee from anyone who does. So read this page as what it is: a contractor writing down what the Commonwealth actually offers, with a link to every source, because most of the homeowners who call us have no idea the state programs exist.
What we can do on the financing side is practical. We give you a written estimate detailed enough for a lender to underwrite, and once your loan is in place we work to its draw schedule and inspection points instead of asking you to bend the loan around us.
The program built for this
The MassHousing ADU Loan Program
MassHousing opened the Accessory Dwelling Unit Loan Program (ADULP) to homeowners in 2026. It exists because the usual answer — borrow against your equity — fails the homeowners who most want an ADU: people whose house is worth plenty on paper but who cannot reach that value through a home equity line, and people holding a low-rate first mortgage they would be foolish to refinance.
Detached ADU
up to $250,000
Attached ADU
up to $150,000
How much
Up to $250,000 for a detached ADU, and up to $150,000 for an attached one. Funds must be used to cover the costs of constructing the ADU.
What kind of loan
A fixed-rate second mortgage. It sits behind the mortgage you already have rather than replacing it, so you keep whatever rate you locked on the house.
How it is structured
Two pieces at once — an amortizing, interest-bearing loan paired with additional financing at zero percent interest with deferred repayment. Blending the two lowers the effective cost of the money and lets a homeowner borrow more in total than the interest-bearing piece alone would support.
Who qualifies
You must own a single-family home and occupy it as your primary residence, meet the income limit for your county, and have your plans, permits, and other pre-development materials in hand and be ready to start construction. MassHousing notes that additional eligibility requirements apply.
The timing trap
Projects started before the loan closes are not eligible. If you break ground first, you have disqualified yourself. Line the financing up before a shovel moves.
Where to apply
Not directly with MassHousing. ADULP loans are made through MassHousing's lending partners, and you contact a lender serving your community.
The Income Limit for the North Shore
ADULP eligibility is capped at 135 percent of area median income, and MassHousing publishes the dollar figure county by county. Essex County covers every one of the 25 municipalities in our town lookup— Peabody, Salem, and Gloucester among them — and its limit is:
That is a genuinely high ceiling — well above the median household on the North Shore — so a great many homeowners who assume they earn too much to qualify for a state program do not. The limits are revised periodically and differ by county; the current sheet is linked in the sources below.
What About the Rate?
When applications opened on March 17, 2026, the Commonwealth announced a rate of 5.25% on the interest-bearing portion, amortizing over 20 years, matched with the zero-interest deferred piece. That is the only rate figure either MassHousing or the Commonwealth has published.
MassHousing’s own program page carries no standing rate, and second-mortgage pricing moves on rate sheets that lenders receive daily. So treat 5.25% as the figure at launch, not as today’s quote, and get the current number from a participating lender. We would rather tell you that than print a number that has quietly gone stale.
Lenders Serving Essex County
ADULP loans are originated by MassHousing’s lending partners, not by MassHousing. These are the partners listing Essex County in their service area as of September 2, 2026. The roster grows as banks sign on, so check MassHousing’s page for the current list before you start calling — and note that we have no relationship with, and receive nothing from, any of them.
StonehamBank
Essex and Middlesex counties
BankFive
Statewide
TruNorth Bank
Statewide
Webster Five
Statewide
The State Will Cover a $500 Feasibility Study
Before financing comes the question of whether an ADU is even sensible on your lot. The Massachusetts Housing Partnership runs an ADU Incentive Program, with the Executive Office of Housing and Livable Communities, whose first phase is a directory of feasibility study providers who have agreed to charge property owners no more than $500 for a study. MHP pays $500 directly to the provider for each completed one. Any Massachusetts property on which residential use is allowed may receive one study under the program.
What a study covers
- Your property’s specific conditions and constraints
- Local zoning and permitting considerations
- Utility needs — water, sewer, and energy
- Preliminary design considerations
- High-level cost and budget estimates
What it does not cover
- Architectural designs and engineering plans
- Construction documents and permit applications
- Any guarantee that the ADU is constructable, or that permitting, financing, or construction will be approved
MHP does not prescribe a format, so the depth of a study varies by provider. Receiving one obligates you to nothing.
The Other Ways Homeowners Pay for an ADU
The MassHousing program is new and income-capped, so plenty of ADUs are financed the conventional way. We have no rates to quote you on any of these — that is a lender’s job and the numbers change weekly. What we can tell you is how each one behaves on a construction project.
Home equity loan or HELOC
The most common way an ADU gets built today. You are borrowing against the equity already in your house, so the amount available depends on what the house is worth now — not on what it will be worth with a second unit on the lot. Homeowners who are equity-rich find this simple; homeowners who bought recently often find the ceiling too low. A HELOC's variable rate is also a real consideration over a build that runs several months.
Cash-out refinance
Replaces your existing mortgage with a larger one and hands you the difference. The arithmetic only works if the rate you would take today is close to the rate you already hold. For anyone carrying a mortgage from the low-rate years, refinancing the whole balance to fund an ADU usually costs far more than it raises. This is exactly the problem a second mortgage like the ADULP is designed to sidestep.
Construction or construction-to-permanent loan
Purpose-built for new building. The lender advances money in draws against completed stages rather than in one lump sum, holds an inspection or title update at each draw, and — in the construction-to-permanent version — converts to a regular mortgage when the certificate of occupancy lands. It carries more paperwork and a draw schedule the builder has to work to, which we are set up for.
Renovation mortgage
Some loan products underwrite against the property's value after the improvements rather than before, which matters when the whole point is that the finished project is worth more than the lot is today. Whether an ADU qualifies depends on the specific product, so ask a lender directly rather than assuming.
Cash and staged construction
Some homeowners fund the shell and finish the interior later as cash allows. It avoids interest entirely, but a partially finished unit produces no rent and cannot receive a certificate of occupancy, so the carrying cost is real even when there is no loan. If you are considering this, tell us early — the phasing has to be designed in, not improvised.
Energy Efficiency Financing
The Mass Save HEAT Loan offers 0 percent financing up to $25,000 for qualifying energy-efficiency upgrades, and is open to customers of Berkshire Gas, Cape Light Compact, Eversource, Liberty Utilities, National Grid, and Unitil. Certain measures require a no-cost Home Energy Assessment before they qualify.
Be careful with this one. HEAT Loan eligibility is decided measure by measure against Mass Save’s own list, and a new dwelling is a different animal from an efficiency retrofit of an existing house. Whether any part of your ADU scope qualifies is a question for Mass Save directly — we will not tell you it does when the answer depends on program rules we do not administer. Ask them before you build the number into your budget.
What is worth understanding either way is that your town’s energy code tier sets the performance bar your ADU has to clear, which drives both what it costs to build and what incentives it may reach.
Where Financing Falls in the Build
Most homeowners assume money comes first. For the MassHousing program it does not, because you have to hold plans and permits before you can apply and a project started before closing is disqualified. That inverts the order people expect, and getting it wrong costs you the program. In practice the sequence runs: work out whether the lot supports an ADU, get drawings, get permitted, then close the financing, then break ground.
ADU Financing Questions
Is there a state loan program for building an ADU in Massachusetts?
Yes. MassHousing's Accessory Dwelling Unit Loan Program (ADULP) provides income-eligible homeowners with a fixed-rate second mortgage of up to $250,000 for a detached ADU and up to $150,000 for an attached one. It combines an amortizing, interest-bearing loan with additional zero-interest, deferred-repayment financing, which lowers the effective borrowing cost. Loans are made through MassHousing's lending partners rather than by MassHousing directly.
What is the income limit for the MassHousing ADU loan on the North Shore?
MassHousing publishes ADULP income limits by county at 135 percent of area median income. For Essex County — which covers Peabody, Salem, Beverly, Danvers, Gloucester, and the rest of the North Shore — the limit is $209,250, effective June 15, 2026. Limits differ by county and are revised periodically, so check MassHousing's current income limits sheet before relying on the figure.
What interest rate does the MassHousing ADU loan carry?
When applications opened on March 17, 2026, the Commonwealth announced a rate of 5.25 percent on the interest-bearing portion, amortizing over 20 years, paired with a zero-interest deferred piece. MassHousing's program page does not publish a standing rate, and second-mortgage rates are set on rate sheets that change, so treat 5.25 percent as the launch figure and confirm the current rate with a participating lender.
Do I need permits before I apply for ADU financing?
For the MassHousing program, yes. Homeowners must have all plans, permits, and other pre-development materials in hand and be ready to move forward with construction before applying, and a project started before the loan closes is not eligible. That puts financing after design and permitting in the sequence, not before — which is the opposite of how most homeowners assume it works.
Is there any help paying for the early feasibility work?
The Massachusetts Housing Partnership runs an ADU Incentive Program, in collaboration with the Executive Office of Housing and Livable Communities, that maintains a directory of feasibility study providers who have agreed to charge property owners no more than $500. MHP pays $500 directly to the provider for each completed study. Any Massachusetts property on which residential use is allowed may receive one study under the program. A feasibility study covers site conditions, local zoning and permitting considerations, utility needs, preliminary design thinking, and high-level cost estimates — it does not include architectural designs, engineering plans, permit applications, or any guarantee that the ADU can be built.
Can I use the Mass Save HEAT Loan for an ADU?
The Mass Save HEAT Loan offers 0 percent financing up to $25,000 for qualifying energy-efficiency measures, and is open to customers of Berkshire Gas, Cape Light Compact, Eversource, Liberty Utilities, National Grid, and Unitil. Eligibility is decided measure by measure rather than project by project, and certain measures require a no-cost Home Energy Assessment first. Whether any part of a specific ADU scope qualifies is a question for Mass Save, not for a builder — ask them before you count on it.
Do these programs apply in southern New Hampshire?
No. MassHousing's ADU Loan Program, the MHP ADU Incentive Program, and Mass Save are all Massachusetts programs, and none of them applies to a property in New Hampshire. We build in southern New Hampshire, but a homeowner there would be looking at conventional home equity, construction, or renovation financing rather than any of the programs described on this page.
Does Don Perry Construction arrange the financing?
No. We are a builder, not a lender or a broker. We take no referral fee from any lender and have no financial relationship with any of the programs on this page. What we do is give you a written estimate solid enough to take to a lender, and work to the draw schedule your loan requires once you have one.
Sources
Every program figure on this page was read off the program’s own page or document on September 2, 2026. Loan terms, income limits, and lender rosters change — verify against the source before you rely on any of it, and never take a builder’s summary over a lender’s.
- Accessory Dwelling Unit Loan Program (ADULP) — MassHousing
- ADULP Income Limits by County (effective June 15, 2026) — MassHousing
- Governor Healey and MassHousing Launch Affordable ADU Financing for Massachusetts Residents (March 17, 2026) — Mass.gov
- ADU Incentive Program — Massachusetts Housing Partnership
- 0% Interest Financing (Mass Save HEAT Loan) — Mass Save
- Accessory Dwelling Units — Commonwealth of Massachusetts
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