Assistance repayment and recapture calculator
What you owe back depends on the structure of the assistance, not the amount. This calculator models a grant, a forgivable second, a deferred second, a repayable second and a shared-appreciation second at the year you expect to sell or refinance, and explains prepayment penalties and federal recapture tax separately, because they are not the same thing.
Quick answer: What does an assistance second actually cost you?
It depends on the structure. A grant costs nothing. A forgivable second costs nothing if you stay past the forgiveness period and the full unforgiven balance if you don't. A deferred second is repaid in full on sale or refinance. A repayable second adds a fixed monthly payment for its term.
TL;DR
- Cost is driven by structure and how long you stay.
- Shared-appreciation programs take a share of your gain, not a fixed amount.
- Federal recapture tax can apply to some bond-funded loans sold within nine years.
Quick questions
- What is shared appreciation?
- Instead of interest, the agency takes an agreed percentage of the home's price increase when you sell or refinance.
Published Last updated
- Reviewed September 2026
What would you owe back?
Pick the structure, the amount and the year you might sell or refinance. Illustrative only — the recorded note and mortgage you sign at closing govern what is actually owed.
About 50% of the assistance has been forgiven by year 5. Many programs forgive in equal annual steps; some forgive nothing until the final day of the term, in which case the full $20,000 would be due.
Prepayment penalties. Assistance seconds do not normally carry a prepayment penalty — paying one off early simply ends the lien. What feels like a penalty is usually unforgiven principal on a forgivable second, or a deferred balance coming due earlier than you planned.
Federal recapture tax. Assistance delivered through a mortgage revenue bond program can trigger a federal recapture tax if you sell at a gain within nine years and your income has risen above the program threshold. It is a tax owed to the IRS, not a payoff to the agency, it applies to relatively few households, and some housing finance agencies reimburse borrowers who owe it. This is not tax advice.
Refinancing with a second in place. A refinance usually requires the agency to subordinate its lien, or requires payoff. Get subordination confirmed in writing before you pay for an appraisal.
Four structures, four completely different outcomes
The dollar amount of assistance says almost nothing about what it costs you. $20,000 as a grant costs nothing. The same $20,000 as a repayable second at 2% over ten years costs about $184 a month for a decade and reduces the price you qualify for. The same $20,000 as a deferred second costs nothing monthly and everything at sale.
Buyers routinely choose the largest number available. The better question is which structure fits how long you will realistically be in the home. A five-year buyer with a ten-year forgivable second is planning to hand half of it back.
- 1
Grant
Never repaid. Occupancy conditions may still apply, and grants are typically the smallest amounts and the fastest to run out of funds.
- 2
Forgivable second
Written off over a term — commonly five to ten years of continuous owner-occupancy. Sell early and you repay the unforgiven part.
- 3
Deferred second
No monthly payment; principal due on sale, refinance, transfer or when the home stops being your residence. Frequently the largest amounts.
- 4
Repayable second
Amortising monthly payment from month one. Counts in your debt-to-income ratio, which is the hidden cost.
A worked example at year five
Take $20,000 of assistance on a $400,000 purchase, and assume you sell in year five with the home appreciating 3% a year to about $463,700.
As a grant, you owe nothing. As a ten-year forgivable second forgiving in equal annual steps, half is forgiven and you repay about $10,000 from the proceeds. As a deferred second, the full $20,000 comes off the closing statement. As a repayable second at 2% over ten years, you have paid roughly $11,000 in payments already and still owe about $10,900 in remaining balance. As a 25% shared-appreciation second, you repay the $20,000 plus about $15,900 of the gain.
Same headline number, five very different results. The calculator above runs your own figures through the same logic.
Prepayment penalties, recapture, and what is actually being charged
Three different things get called a penalty and only one of them is a fee. Assistance seconds generally have no prepayment penalty: pay it off and the lien releases. Unforgiven principal on a forgivable second is not a penalty either — it is the part of a conditional gift whose condition you did not complete. Federal recapture tax is a tax liability to the IRS on a bond-financed loan, not a payment to the housing agency.
Knowing which one you are facing changes what you do about it. A payoff is negotiable in timing. Forgiveness is a calendar. Recapture is a tax question for a tax professional, and it applies only where a bond program and a gain and an income increase all coincide.
Repayment questions
Do you have to pay back down payment assistance?
It depends entirely on the structure. A true grant is never repaid. A forgivable second is written off over a set occupancy period. A deferred second is repaid in full when you sell, refinance or move out. A repayable second is paid monthly from the first month, like any other loan.
What happens if I sell before a forgivable second is fully forgiven?
You repay the unforgiven portion out of the sale proceeds at closing. Programs that forgive in equal annual steps leave you owing a proportional balance; programs that forgive everything on the final day of the term leave you owing the whole amount right up until that date. Which of the two applies is written into your note.
Is there a prepayment penalty on down payment assistance?
Assistance seconds do not normally carry a prepayment penalty — paying one off early simply releases the lien. What buyers experience as a penalty is almost always unforgiven principal on a forgivable second or a deferred balance coming due earlier than planned.
What is federal recapture tax?
Assistance delivered through a mortgage revenue bond program can trigger a federal recapture tax if you sell at a gain within nine years and your income has risen above the program threshold at the time of sale. It is a tax owed to the IRS rather than a payoff to the agency, it affects relatively few households, and some housing finance agencies reimburse borrowers who owe it. This is general information, not tax advice.
Does renting out the home trigger repayment?
Usually yes. Nearly every program requires the home to remain your primary residence, and converting it to a rental is commonly treated the same as a sale — the deferred or unforgiven balance becomes due. Some programs allow limited exceptions for military relocation or documented hardship.
Can I refinance without paying the assistance back?
Only if the administering agency agrees to subordinate its lien behind the new first mortgage. Many agencies will subordinate for a rate-and-term refinance and refuse for a cash-out. Get the answer in writing before you spend money on an appraisal.
What is a shared appreciation second?
Instead of interest, the program takes a share of the increase in the home's value. On $400,000 growing 3% a year, five years of appreciation is about $63,700; a 25% share is roughly $16,000 on top of the original amount. Most such programs cap the repayment at the original amount in a flat or falling market.
Does a repayable second affect what I can qualify for?
Yes. The monthly payment on the second counts in your debt-to-income ratio from day one, so it reduces the purchase price your income supports. This is the main reason a repayable second is not simply a smaller version of a grant.
Does interest accrue on a deferred second?
Some are genuinely zero-interest and only the principal comes back. Others accrue simple interest that is added to the payoff. The note states which, and the difference over ten years is substantial.
What if the home is worth less than I owe when I sell?
Deferred and forgivable seconds are repaid from proceeds, and if the proceeds do not cover both liens the agency's process for a short payoff applies — approval is required and it is not automatic. Shared appreciation structures generally cannot demand more than the original amount when there is no gain.
Does the assistance lien show on my credit report?
A repayable second is a loan and generally reports like one. Deferred and forgivable seconds may or may not report, but they are always recorded against the property and will always appear on a title search and a payoff demand.
What happens to the second if I die or transfer the home?
Most notes treat a transfer of title as a maturity event, with exceptions commonly written in for transfers to a surviving spouse or to a family member who will occupy the home. The specific carve-outs are program by program.
How do I find out the exact terms of my own assistance?
Read the recorded note and mortgage from your closing package — they govern, not any summary, including this page. If you cannot locate them, the administering agency or the title company that closed the loan can supply copies.
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September 2026 Assistance Repayment Terms Review
We reviewed published forgiveness and deferral terms across the programs we track, shared-appreciation repayment conventions and federal mortgage revenue bond recapture rules relevant to this page. No material changes requiring substantive revisions were identified this month. The information and sources shown here remain current as of our latest review.
- Checked: published forgiveness and deferral terms across the programs we track
- Checked: shared-appreciation repayment conventions
- Checked: federal mortgage revenue bond recapture rules
Current data & page updates
- Page last reviewed
- September 4, 2026
- Page last substantively updated
- September 4, 2026
- Next scheduled review
- October 4, 2026
- Current monthly review
- September 2026
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