DPA Repayment Terms in 2026: Deferred Loans, Second Liens, and When You Have to Pay It Back

Down payment assistance comes in multiple structures, and the repayment terms determine the true cost. An originator who cannot explain the difference between a grant, a forgivable second, and a deferred payment lien is leaving borrowers uninformed and potentially closing loans that are not in the borrower's best interest.

True Grant

A true grant requires no repayment under any circumstances. They are rare. Most programs described as grants are either forgivable loans or programs with conditions that could require a pro-rated payback. True grants are fully excluded from DTI and do not require subordination if the borrower refinances later.

Forgivable Second Lien

A forgivable second is structured as a mortgage with a forgiveness schedule. The balance is forgiven either on a pro-rated basis over time (such as 20% per year for five years) or as a cliff vest at the end of the forgiveness period (full balance forgiven after 10 years). If the borrower sells, refinances, or transfers title before forgiveness is complete, the remaining balance becomes due. A zero-payment forgivable second does not add to DTI during the forgiveness period.

Deferred Payment Second Lien

A deferred payment second lien has a balance that is owed but requires no monthly payment until a trigger event: sale, refinance, title transfer, or loan maturity. At origination, a deferred second with no monthly payment does not add to DTI. At refinance, the second lien must be paid off or the servicer must agree to subordinate. Many DPA programs will not subordinate, which prevents refinancing the first mortgage without extinguishing the DPA second.

Repayable Second Lien

A repayable second lien has a defined monthly payment, typically at a below-market interest rate. This payment counts fully in DTI at origination. Repayable seconds are common in employer-assisted housing programs and some city and county DPA programs. The CLTV includes the second lien balance and must fall within program limits.