Forgivable Loans, Deferred Loans, Liens, and Recapture Rules

Last updated: October 18, 2026

Bottom Line

A forgivable loan is a debt until the program forgives it. A deferred loan may have no monthly bill but still come due later. A lien ties a claim to your home. A recapture rule says when a program can ask for money back.

These forms of help can pay for a roof, heat, wiring, or other needed work. They are not always a bad deal. But your written agreement matters more than the program name. Start by asking for the loan terms, all repayment triggers, and an example of what you would owe if you sold the home.

What the Loan Words Mean

A program may call a loan a “soft second.” This often means a smaller loan behind a first home loan. The CFPB junior lien guide explains that another loan may also be secured by your home. A lien can affect a sale or new loan even when you owe no monthly payment.

Never assume a lien means the city plans to take your home. Yet you must read the default rules. A lender may have legal rights if you break the terms. Ask what notice and chance to fix a problem you would get.

How Forgiveness Works

Programs do not all erase loans the same way. Some forgive one part each year. Some forgive the whole debt on one last date. Some forgive only a share of the loan.

A deferred loan may have no forgiveness at all.

For example, say you get a $20,000 loan that forgives one-fifth each full year. After two full years, $8,000 might be gone and $12,000 might remain. This is only a math example, not a promise about any real program. A loan with all-at-once forgiveness could still have a $20,000 balance at that same point.

Ask if a partial year counts. Ask what happens if you move out for medical care. Ask if interest, fees, or a final due date can raise what you owe.

The phrase “self-amortizing” may be used for a balance that falls over time. Have the office show you the exact schedule.

Sale, Refinance, and Other Repayment Triggers

Some loan rules are tied to staying in the home. Others limit how you can change the deed or take out a new mortgage. None of the events below is a trigger in every program.

Subordination means the repair lender agrees to keep its claim behind a new first mortgage. Approval is not certain. A new lender may need that approval before closing. Ask about fees, review time, home value rules, and whether the program allows cash-out.

A sale with little equity can be hard. Do not assume the city will only take money left after other debts and costs. Some agreements limit repayment to net sale proceeds; others do not. Get the payoff method in writing.

Marriage, divorce, a trust, a life estate, and an inheritance can also affect title. State law and the signed contract both matter. Before any deed change, get advice from a lawyer who knows local property law.

Real Home Repair Program Examples

These are local examples, not plans open to all U.S. homeowners. Each city sets its own rules. Funding, intake, waitlists, and income limits may change. Use each official page to check the current application path.

Orlando, Florida: the amount changes the lien term

The city lists aid up to $20,000 as a grant with no lien term. It lists a 10-year lien for $20,001 to $45,000, and a 15-year lien above $45,000. For aid above $20,000, Orlando records a note and mortgage. The loan is forgiven if you meet its home and ownership rules for the full period.

The city says sale, rental use, moving out, or some types of refinance may lead to prorated repayment. Cash-out and debt-consolidation refinance are named triggers. You must own and live in a single-family home within city limits and meet income and other rules.

Apply through the city’s Orlando repair application page. The city says aid depends on available funds. If you are asked to finish an application, check its 30-day document deadline.

Boston, Massachusetts: no monthly bill, partial forgiveness

The Boston Home Center lists interest-free, deferred loans up to $50,000. It says the loan comes due on sale, transfer, or refinance. One-third is forgiven after ten years of continuous owner occupancy. That means the full loan is not forgiven at ten years.

Boston’s program serves eligible owner-occupants of small homes and certain condos. The income cap is 135% of area median income. Some applicants must add their own funds. Older homeowners may get more help with bids and the repair work.

Review the Boston Home Center program or call 617-635-4663. Ask what part of your loan would still be due after ten years.

Milwaukee, Wisconsin: one part may be forgiven

Milwaukee’s STRONG Homes program offers $1,000 to $25,000 for key repairs, with a mortgage on the property. It may forgive 25% of the first loan amount, up to $5,000, after ten years of ownership and occupancy. The rest remains a repayable loan.

A zero-interest deferred option may be offered to eligible low-income owners who are at least 60 or disabled. Other loans can have monthly bills and interest. Check the STRONG Homes loan terms and application steps.

The city lists 414-286-5610. Do not confuse the ten-year credit with full loan forgiveness.

Phoenix, Arizona: a fully forgivable deferred loan

Phoenix calls its Housing Repairs Program a no-cost, no-payment, fully-forgivable deferred loan. Repairs may cover unsafe wiring, air conditioning, plumbing, and damaged structures. The Phoenix housing repair page has a household form, income limits, and a phone number: 602-534-4444.

That name does not tell you every title or sale rule. Request the actual loan papers, the required stay in the home, and the plan to release any lien before you agree.

Dallas, Texas: a grant and a loan are different

Dallas lists a Dallas Tomorrow Fund grant of up to $20,000 for certain exterior code cases that are referred by Code Compliance. Its Major-Systems Repair Program lists an interest-free, forgivable loan of up to $24,000 for eligible systems work. See the city’s Dallas repair program details.

These are two types of aid, not two names for the same offer. Ask which one you may get, how to apply, when intake is open, and what deed or lien rules apply. A city listing is not proof that funds are still available.

USDA Section 504: a grant may still have recapture

The rural Section 504 program lists loans up to $40,000 at 1% interest for 20 years. It lists grants up to $10,000 for eligible homeowners age 62 or older who cannot repay a loan. A higher grant limit can apply to qualified disaster repairs. USDA says a Section 504 grant must be repaid if the home is sold in less than three years.

Owners must live in an eligible rural area, meet very-low-income rules, and lack affordable credit elsewhere. USDA accepts applications through local offices year-round, but approval depends on funds. Read the official USDA Section 504 rules and contact the office for your state.

What a Lien Means When You Refinance

A new bank may ask who holds each claim on your home. You may need a lien payoff or a signed subordination form. Get this answer before you pay for an appraisal or set a closing date.

New York City’s housing agency explains that repair aid may leave a city lien. Its NYC mortgage servicing rules set out paths for a rate-and-term refinance, cash-out refinance, sale, and transfer. Some refinances may keep the aid in place; some require full or partial payoff. These are NYC rules, not rules for other cities.

When the balance is paid or forgiven, ask for the recorded lien release. Check it with the county land-records office. A paid debt and a cleared title are not the same task.

What to Check Before You Sign

A loan file may include a promise to pay, a lien form, a rule about living in the home, and a default section. It may also set rules for insurance and property taxes. Read all of them, not just the page with the loan amount.

Some aid loans use different forms from a standard mortgage. The CFPB loan disclosure guide explains some of these cases. Do not assume you can cancel within three days.

The CFPB lists exceptions to cancellation rights, including some state-agency loans. Ask which rights apply before signing.

Before applying, gather the deed, proof of income, tax bill, mortgage bill, insurance, repair photos, and any code notice. Our repair document checklist can help. Manufactured homes may have a separate title or lot lease. Check our manufactured home repair guide for those issues.

Do not start work before written approval. Many public programs must check bids, permits, and the home first. Homes built before 1978 may need special lead-safe work under EPA repair safety rules.

Where to Get Help or Find Another Option

If you cannot understand the papers, ask a housing counselor to go over them. Use the HUD housing counseling page or call 1-800-569-4287. For deed, estate, or lien disputes, try the legal aid office finder. You may need a local lawyer.

If the terms are too risky, ask about a smaller repair grant, weatherization work, volunteer repairs, or aid for an urgent safety issue. Our home repair starting guide shows where to ask. Local governments may use federal funds for grants or loans; our local CDBG repair guide explains that route.

Do not assume another loan is safer just because it has no city lien. Compare the rate, monthly bill, full cost, and risk to your home. Use our repair loan safety guide when you compare offers.

Check a program through its official office. Our government program check guide can help. For a loan or lien problem with a lender or servicer, use the CFPB complaint process or call 1-855-411-2372.

Questions Homeowners Often Ask