The Quick Read: It depends on the shape of your assistance. A grant has nothing to repay, so a refinance usually leaves it alone. A second lien does not get that pass: it is either paid off at closing or kept in place through a subordination agreement. That choice, not the new first mortgage alone, decides what your total monthly obligation looks like afterward.
What are the four shapes, and which ones carry a payment?
Across the wholesale programs Lendmire places files with, there are four shapes of assistance. Two of them carry a monthly payment: the repayable second and the refinance-cost second, which follows the same repayment terms.
The grant is 2% or 3.5% of the price. There is nothing to repay, no lien and no payment. The forgivable second is 3.5% of the lesser of price or appraised value, with no interest and no payment. It is forgiven after the first 36 or 60 on-time first-lien payments. The repayable second is 3.5% or 5% of the lesser of price or value, and it is a real loan. It has interest, a monthly payment, 30-year amortization and a balloon due in year 10. The refinance-cost second is a separate product with the same repayment terms, covered below.
Nobody has to be a first-time buyer for any of these. Repeat buyers qualify. All of them are for an owner-occupied primary residence only. You can read the full menu on Lendmire’s down payment assistance programs page.
What happens to your payment, by type?
Here is the side-by-side. It assumes the first mortgage is refinanced and the assistance stays in the file.
| Assistance shape | Due at refinance? | Does its payment change? | Your options |
|---|---|---|---|
| Grant | Usually no | None existed | Check the grant paperwork for occupancy terms |
| Forgivable second | Often, if still unforgiven | None existed | Pay off, subordinate, or wait out forgiveness |
| Repayable second | Often | Continues if kept | Pay off or subordinate |
| Refinance-cost second | Only at the next payoff | Same as repayable | Treat like the repayable second |
The first-lien payment is the part a refinance can change. The second behaves on its own terms, and the new first loan cannot rewrite them.
Does a grant change anything when you refinance?
Usually not. A grant is released at closing with no lien, so there is nothing to pay off or re-subordinate. Your refinance is just a first-lien refinance.
One caution. A grant can still carry an occupancy or recapture clause even without a lien. Read the grant agreement before you apply. If the paperwork is silent, the safe move is to ask the program administrator in writing.
What are the three routes for a second lien?
A second lien forces a choice. The first lien being replaced has to sit in first position, so the second is either removed or moved behind the new loan.
Route 1: Pay it off at closing. The second is retired. For a repayable second, its monthly payment ends, but you need cash to close or a larger new first loan, where the loan type allows it. For a forgivable second still inside its 36- or 60-payment window, the unforgiven balance may come due. Read your note.
Route 2: Keep it and subordinate. The second stays, and the program signs a subordination agreement that places it behind the new first. Its terms stay the same. A repayable second keeps its payment and its year-10 balloon. A forgivable second keeps counting toward forgiveness, if the program allows that.
Route 3: Roll it into the new loan. This depends on the loan type. In some programs, secondary financing such as down payment assistance loans cannot be included in a new guaranteed refinance loan. It has to be subordinated or paid in full. Where a wrap-in is allowed, the new first balance gets bigger, and so does the first-lien payment.
Can the program refuse to subordinate?
Yes. This is where files get stuck. Subordination is the assistance provider’s decision, not FHA’s, USDA’s or HUD’s. Some state housing agencies do not subordinate most of their seconds. Others subordinate only into their own refinance product. Section 184 does not itself lend, provide down payment assistance or give grants, so terms come from whoever provided the assistance.
If the holder refuses, you have one real choice: pay the second off or skip the refinance. Ask about the subordination policy before you apply, not mid-file.
How does a second count in the new loan?
Two ways. First, a second lien counts toward combined loan-to-value. HUD’s handbook glossary defines CLTV as the first-loan base amount plus the outstanding principal of all subordinate mortgages, divided by adjusted value. A bigger second leaves less room.
Second, a repayable second’s monthly payment counts as a debt when the new first is underwritten. A forgivable or deferred second adds no monthly payment, but its balance still matters for CLTV.
FHA does not treat a soft second as a gift. In HUD’s archived guide on secondary financing by governmental agencies, financing that creates a lien is secondary financing, even if it is “soft” and later forgiven. That guide is archived, so read it as background, not current policy. Current FHA refinance rules live in Handbook 4000.1, which HUD’s FHA info page points to.
How do the first-loan types differ?
FHA. On a streamline, existing subordinate financing generally has to be re-subordinated. New subordinate financing is limited to reducing principal or financing refinance costs. A rate and term refinance runs under a maximum CLTV and needs a payoff statement for each existing mortgage. Confirm the details in Handbook 4000.1.
USDA. The refinance has to be fixed rate, 30-year, no cash out and owner-occupied. HB-1-3555 Chapter 6 also applies a tangible-benefit test, meaning the refinance has to give you a real benefit. A streamlined-assist refinance skips the debt ratio calculation.
HUD-184. Refinance comes in rate and term, cash-out and streamline types. The borrower pays a new guarantee fee and the file is underwritten on ability to repay. Rules on subordinating assistance are not clearly set at the federal level. Check with the tribe and the lender.
What does a before-and-after look like?
No dollar figures here, because every file differs. Picture a buyer with an FHA first lien and a repayable second, who refinances the first.
- Pay off the second from cash: the first-lien payment may drop, the second’s payment disappears, and cash to close goes up.
- Subordinate the second: the first-lien payment may drop, the second’s payment continues, and cash to close stays lower.
- Roll it in, where allowed: one payment replaces two, but the new first balance is larger.
Now picture the same buyer with a forgivable second still inside its window. Subordination, if offered, keeps the clock running. Payoff may trigger repayment of the unforgiven part. Waiting out the forgiveness period may be a more affordable move.
When does a refinance stop making sense?
Skip it when the savings on the first lien are eaten by the cost of removing the second. Also skip it when you are close to forgiveness and a refinance would reset or void it. And skip it when the program will not subordinate and you lack cash or equity to pay it off.
The reverse also holds. If you have built equity, paying off a repayable second can end a monthly payment and the year-10 balloon in one step.
Is there assistance for the refinance itself?
Yes, in one narrow form. Across the network, a refinance-cost second covers 1% to 3.5% of the lesser of the current first balance or appraised value toward closing costs on an FHA 203(b) refinance, with combined leverage up to 104%. The credit floor is 660. It is not available on a streamline, and not to refinance an existing assistance loan. It is a loan with the same repayment terms as the repayable second. This is arranged through wholesale lenders, subject to program guidelines and full underwriting.
Key Terms Defined
Second lien: a loan recorded behind your first mortgage, which gets paid second if the home is sold.
Subordination: a signed agreement that keeps the second lien behind a new first mortgage.
Payoff statement: a document from the holder showing the balance needed to retire a loan.
CLTV: the first loan plus all other liens, divided by the home’s value.
Recapture: repayment of assistance when a condition, like occupancy, is broken.
Balloon: a lump-sum balance due at the end of a set term, year 10 on the repayable second.
What should you ask before you apply?
1. Is my assistance a grant or a lien?
2. If a lien, what is the current balance, and is any of it forgiven yet?
3. Will the holder subordinate, and does it have a form and a process?
4. Is there a fee for subordination or payoff?
5. Does my note carry a trigger on refinance, sale, or change of occupancy?
6. What does the new first loan’s CLTV look like with the second counted?
Ask early. Title work has to confirm the new first sits in first position, and a late “no” from the holder can stall the file. HUD-approved housing counseling is a neutral place to talk it through.
If you are buying a primary home and want to see whether a down payment assistance option fits your file, Lendmire can help you compare the grant, forgivable and repayable structures alongside an FHA, USDA or HUD-184 first mortgage. Reach the team at 828-256-2183.
Frequently Asked Questions
Do I have to repay my assistance if I refinance?
Only if it is a lien, and often then. A grant with no lien generally stays untouched. A second lien is either paid off at closing or kept in place by subordination, and a forgivable second still inside its window may owe the unforgiven part. Your note controls.
Does my payment go up after a refinance?
Not necessarily. The first-lien payment can fall. A repayable second keeps its own payment if it stays in place, and a payoff or wrap-in shifts the cost into cash to close or a larger first balance. A forgivable or deferred second adds no monthly payment either way.
What if the program will not subordinate?
Then the second has to be paid off to refinance, or you keep your current first mortgage. Some public programs refuse subordination on most products, and others allow it only into their own refinance product. Ask before you apply.
Does the type of first mortgage matter?
Yes. USDA bars rolling assistance loans into a guaranteed refinance. FHA applies subordination and CLTV rules by refinance type. Section 184 does not set assistance terms at all. The first-loan type sets the outer limits, and the assistance holder’s note sets the rest.
Can I use assistance on a rental or second home?
No. These options are for an owner-occupied primary residence only.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, USDA and HUD-184 home purchase financing with grant-style, forgivable and repayable down payment assistance options in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. USDA HB-1-3555 Chapter 6 (advance copy)
2. HUD Section 184 Policy Handbook, Chapter 2
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Document a Gift Alongside Down Payment Assistance · How to Go From Renter to Owner With Down Payment Assistance · How Down Payment Assistance Compares to One More Year of Rent
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.