Renovation loans in Massachusetts: HELOC, 203(k), Get the Lead Out, HEAT Loan and more

Homeowners in Somerville and Cambridge ask the same thing after the walkthrough: how do people actually pay for this? Choosing the right renovation loan in Massachusetts can matter as much as choosing the right contractor.

The short answer: most people use home equity (a HELOC or a cash-out refinance), an FHA 203(k) loan, or a targeted state or city program. I am a builder, not a lender or financial advisor. This is general information to help you ask better questions. Talk to a lender about rates and terms for your situation.

Renovation loan options in Massachusetts at a glance

HELOC and cash-out refinance

Both borrow against the equity in your house. In plain English:

• HELOC (home equity line of credit): a line of credit secured by your home. You draw money as the project moves and usually pay interest only on what you have drawn. That fits renovation, where payments to the contractor come in stages.
• Cash-out refinance: you replace your mortgage with a bigger one and take the difference in cash. It makes sense mainly when the new loan terms work for you overall, since your whole mortgage changes.

Either way, your house secures the loan. Compare offers from more than one lender and read the fees, not just the rate.

FHA 203(k) loan in Massachusetts

The HUD 203(k) program lets you roll repair costs into an FHA mortgage. There are two types:

• Limited 203(k): finance up to $75,000 for minor remodeling and non-structural repairs, like a kitchen update or paint.
• Standard 203(k): for major rehab, including structural work and additions. Repair costs must be at least $5,000, and the property value must stay within the FHA mortgage limit for the area.

HUD describes how the money moves: a HUD-approved consultant (optional for the Limited version) writes up the work and costs, the contractor pulls permits, and after each phase the consultant inspects and the lender releases a draw by two-party check to the owner and contractor. Expect more paperwork than a HELOC, and work with a contractor who is used to draws.

MassHousing Get the Lead Out loan

Most Somerville housing was built long before 1978, so lead paint is common. MassHousing's Get the Lead Out program finances deleading of 1 to 4 family homes, including condos:

• Low- and no-interest loans, depending on the borrower
• Maximum loans of $30,000 to $45,000, depending on property type
• For owner-occupants, loans are deferred with no monthly payments, and MassHousing pays closing costs and fees
• Income limits vary by county; the work must be finished within six months of closing
• Borrowers may also apply for a Lead Paint Credit from the Massachusetts Department of Revenue

You apply through a participating Local Rehabilitation Agency. When I checked, MassHousing's list included two Cambridge agencies but none for Somerville, so call to ask who serves your address. My lead paint guide explains the work itself.

Mass Save HEAT Loan for energy upgrades

The Mass Save HEAT Loan offers 0% financing for eligible energy upgrades such as insulation, heat pumps and batteries. Effective January 1, 2025, the maximum financeable amount is $25,000. It starts with a no-cost Home Energy Assessment. If your renovation opens walls or the attic, pairing it with insulation is smart timing; see my Mass Save insulation rebate guide.

Somerville's Home Improvement Program

The city's Home Improvement Program helps low- and moderate-income owners with code, health and safety repairs. Highlights from the city's page:

• Up to $50,000 per unit for health and safety work, up to $7,500 per unit for lead hazards, and up to $10,000 for heating ($15,000 when converting from fossil fuel to electric)
• Income limit of 80% of Area Median Income, for example $137,100 for a household of four
• A Mass Save energy assessment is required if you have not had one in the past two years
• The loan is due on sale, transfer or cash-out refinance, and rental units must stay at affordable rents

I round up more local programs in my Somerville rebates and loans guide.

Need a hand?

Planning a renovation in Somerville, Cambridge or anywhere in Greater Boston? Book a free walkthrough and I will send a written line-item budget, usually within 48 hours, that you can take to your lender.

Want a real number for your home? See my published prices and how I quote a job, and the towns I work in.

About the author

Mateus Magno founded Magno & Co in 2020. He is a licensed Massachusetts Construction Supervisor (CS-123658), registered Home Improvement Contractor (HIC #220484) and certified Lead-Safe Renovator Supervisor who has renovated and managed over $5 million in projects across Greater Boston.

More about Mateus →