The Healey-Driscoll Administration and MassHousing recently announced the launch of a new, statewide accessory dwelling unit (ADU) loan program for Massachusetts homeowners. The new ADU loan program, announced last December, will provide second mortgages of up to $250,000 to help eligible homeowners across Massachusetts add an additional housing unit to their property.
Eligible Massachusetts homeowners may apply for ADU mortgage financing, which can be promoted through age-friendly community efforts.
Accessory dwelling units are small residential living spaces that are located on the same lot as another home. The Healey-Driscoll Administration’s Affordable Homes Act removed a significant obstacle to ADU construction by legalizing the construction of ADUs in single-family zoning districts statewide. The Administration’s action on ADUs created a simple and effective tool for increasing housing production statewide and lowering housing costs.
The MassHousing ADU loan supports new ADU construction, either within the envelope of an existing home or elsewhere on a homeowner’s lot. The loan is a fixed-rate second mortgage product that finances construction costs up to $250,000 for detached accessory dwelling units, and up to $150,000 for attached accessory dwelling units.
The program is structured to allow qualified Massachusetts homeowners to maximize their borrowing power, without burdening them with excessive debt. The product will be structured as an interest-bearing loan amortizing over a period of 20 years, matched with additional funding offered at zero percent interest and deferred repayment terms. This creative loan structure lowers the effective interest rates for borrowers and allows consumers to access greater overall loan amounts. MassHousing will offer ADU loans to qualified homeowners at an interest rate of 5.25%.
Eligible applicants will meet MassHousing’s statutory income limits of up to 135 percent of the area median income (ranging from $205,335 for a household living in eastern Massachusetts, to $165,345 in Worcester County, to $129,870 in Hampden County) and meet other loan underwriting criteria.
MassHousing’s new ADU loan product is intended to act strictly as construction-to-permanent financing. It will serve homeowners who have designs and permits for their ADU in hand.
MassHousing anticipates that potential borrowers may access MHP technical assistance funding to accomplish predevelopment activities, including design and permitting, then apply for MassHousing financing when they are ready to finance construction of their ADU.
Homeowners should apply for MassHousing ADU financing after they have secured local permits and are ready to move forward with construction. Interested homeowners can learn more about the program and connect with participating lenders by visiting masshousing.com/adu.