The two structures side by side
| Forgivable / deferred | Repayable | |
|---|---|---|
| Interest rate on the second | 0% | Around two points above your first |
| Monthly payment | None | Yes, from the first month |
| Term | Forgiven after a set period — often three years | Amortised, commonly over ten years |
| Typical size | 3.5% of the price | 3.5% to 5%, sometimes with closing costs |
| What ends it | Time in the home | Paying it off |
Those are the two shapes we see across our channels. Both sit behind a standard FHA first mortgage, and in both cases the first and the second together can reach the full purchase price.
The question that decides it
How long are you going to be in this house?
A forgivable second rewards staying. Reach the end of its term and the balance is written off; you paid nothing for it and nothing towards it. Sell or refinance before then and it is still owed, in full, out of your proceeds — which is the part people do not hear, because a second lien with no payment is easy to forget you have.
A repayable second charges you every month from the start, but it is finite and it is yours. No clock, no condition, no reason to avoid selling in year two.
A repayable second is a real payment, and it lands on top of a mortgage payment you are already stretching for. On a $350,000 purchase, 3.5 percent is $12,250 — amortised over ten years at a rate two points above your first, that is well over a hundred dollars a month for a decade, and it counts in your debt-to-income ratio on the day you apply.
The forgivable version has none of that, and for somebody buying a house they intend to stay in, it is usually the better instrument by a distance. It is also, not coincidentally, the one that pays the originator less on some rate sheets. Ask for both, priced the same day.
What to read before you sign either one
- The forgiveness terms, in writing. How long, what counts as staying, and whether it forgives all at once at the end or in slices along the way. “Three years” can mean either.
- What triggers repayment. A sale, certainly. A refinance, usually. Renting the house out, often.
- Where the second sits on a refinance. A second lien has to be paid off or re-subordinated when you refinance the first, and that is not automatic.
None of this is a reason to avoid assistance. It is a reason to know which one you have, because the two are not interchangeable and they are frequently presented as though they were.
Next
What assistance actually costsIt is not free money, and the largest cost is the one nobody mentions.Qualifying for assistanceLower bars than most people assume, and two beliefs that keep the right people from asking.Before you sign for assistance
A grant, a forgivable lien and a loan with a monthly payment are not the same thing, and the paperwork often does not say which one you have. Send us what you were quoted and we will tell you what is actually being handed to you.