- You can usually refinance a mortgage that included down payment assistance, but you may need to repay some or all of the assistance depending on the program’s terms.
- If the assistance was structured as a loan, it may need to be paid off or rolled into your new mortgage, depending on how much equity you’ve built.
- Some DPA programs offer their own refinance options or allow you to keep the assistance intact, but always review your agreement and talk to your lender before moving forward.
Down payment assistance can be a lifesaver for prospective homebuyers who need funds for a down payment or closing costs. But for homeowners who received assistance in the past, the rules around refinancing can be a little confusing.
Can you refinance if you got down payment assistance—and if so, do you have to pay it back? Here’s what you need to know.
Can I Refinance If I Got Down Payment Assistance?
The short answer is yes — you can usually refinance if you received down payment assistance (DPA), as long as you qualify for the new loan. However, depending on the type of assistance you received, you may be required to repay some or all of the funds. In many cases, you can wrap that amount into your new mortgage, though this depends on the equity you’ve built up in your home.
The Type of Down Payment Assistance Matters
Down payment assistance comes in two primary forms: loans and grants.
DPA Loans
Loans are the most common type of DPA. They function as a second mortgage that, depending on the program’s terms, may require monthly payments. In some cases, these subordinate loans can be forgiven after you’ve lived in the property for a specified period of time.
If you received DPA in the form of a loan, there’s a good chance you’ll need to pay off the remaining balance to refinance. If you have enough equity, you may be able to wrap that payoff into your new mortgage.
DPA Grants
Grants are a type of DPA that typically do not need to be repaid — often considered “free money” that doesn’t involve a second mortgage or lien on your title.
However, some grants come with conditions, such as requiring repayment if you sell, move, or refinance within a certain number of years. Review your grant agreement carefully before refinancing to understand whether any restrictions apply.
Check the Terms of Your Down Payment Assistance Program
If you’re currently repaying a DPA loan, the remaining balance will likely need to be paid off when you refinance — most programs do not allow the secondary DPA loan to remain in place while you get a new first mortgage.
If you’re not sure what type of DPA you received, start by reviewing your program’s terms. Look for these keywords, which typically indicate assistance that will need to be paid off or wrapped into your new loan:
- Second mortgage loan
- Deferred mortgage
- Deferred payments
- Unpaid principal balance
- Due and payable in full
Can I Wrap My DPA Loan Into My Refinance?
If your DPA loan needs to be paid off at refinancing, you may be able to roll the balance into your new mortgage — but the biggest hurdle will be whether you have enough equity to do so.
Different loan programs have different maximum loan-to-value (LTV) ratios, which represent how much of your home’s value a lender is willing to finance. Some conventional refinance programs — such as Fannie Mae’s RefiNow or Freddie Mac’s Refi Possible — allow up to 97% LTV, but come with specific eligibility requirements, including income limits and loan seasoning. Most standard conventional refinances require at least 5% equity, capping LTV at 95%.
A 97% LTV means that on a $300,000 home, your primary mortgage and any DPA loans combined cannot exceed $291,000 — assuming closing costs are paid out of pocket.
Here’s how LTV limits compare across major refinance programs:
| Loan Program | Maximum Loan-to-Value |
| Conventional Refinance | 97% |
| FHA Refinance | 97.75% |
| VA Refinance | 100% |
| USDA Refinance | 100% |
FHA, VA, and USDA streamline refinances generally don’t require an appraisal or use LTV as a qualifying factor, which simplifies the process. However, these loans don’t allow you to pay off secondary financing like DPA loans — that balance must remain in place or be paid separately.
Conventional Refinance
A conventional refinance allows you to refinance up to 97% of your home’s value, but only if your loan is owned or securitized by Fannie Mae or Freddie Mac. Otherwise, your maximum LTV is 95% (requiring at least 5% equity).
Check whether your loan is owned by one of these agencies:
FHA Refinance
The FHA allows borrowers to refinance up to 97.75% of their home’s value. In some cases, that additional 0.75% to 2.75% over a conventional loan’s limit can make the difference when trying to wrap in a DPA balance. Borrowers with average or lower credit may also find FHA refinances more affordable than conventional options.
VA Refinance
Eligible borrowers can wrap down payment assistance into a VA refinance for up to the full appraised value of the home, per VA guidelines (though individual lenders may impose stricter requirements). If your primary loan and DPA balance together don’t exceed your home’s current value, you may be able to combine them into a single VA mortgage.
To qualify for a VA refinance, borrowers must generally be active-duty service members or honorably discharged veterans. Your current mortgage does not need to be a VA loan.
USDA Refinance
While the USDA allows borrowers to refinance up to 100% of their property’s value, it is the only agency that does not allow you to wrap DPA into the new loan. Program terms state that borrowers “cannot refinance mortgage debt that is not financed or guaranteed by USDA.”
Since the USDA already allows borrowers to finance the full purchase price (plus the 1% upfront guarantee fee), few USDA buyers receive DPA for anything other than closing costs. It’s also worth noting that only existing USDA borrowers are eligible for USDA refinancing options.
Do I Need a Cash-Out Refinance to Wrap the Second Mortgage?
In most situations, no, you don’t need a cash-out refinance to wrap in your DPA. Both conventional and FHA lenders allow a standard rate-and-term refinance that includes any second mortgage used to purchase your home.
For VA borrowers, the VA IRRRL streamline refinance is only available for existing VA loans and doesn’t allow DPA payoffs. However, the VA cash-out refinance can be used for both cash-out and rate-and-term purposes, making it the primary option for VA borrowers looking to consolidate a DPA loan into their new mortgage. All VA borrowers wrapping in DPA — or refinancing into the VA program from a different loan type — must use a VA cash-out refi.
Refinance While Keeping Your Down Payment Assistance Intact
Whether you have to repay your DPA when you refinance depends on the terms of your specific program. Even when repayment is required, you may have alternatives.
Some DPA programs offer their own refinance options, allowing you to lower your rate and payment while keeping the second mortgage in place. For example, the Ohio Housing Finance Agency offers a refinance option for participants in its DPA program that doesn’t affect the second mortgage. Keep in mind that these program-specific refinances often come with above-market rates.
Other programs — such as those offered through the New Mexico Mortgage Finance Authority — may allow you to refinance just your primary mortgage in cases of financial hardship or similar extraordinary circumstances.
Don’t Unnecessarily Pay Off Your DPA Loan
Some DPA loans are forgivable, meaning you won’t have to repay them once you’ve lived in the home for a certain number of years. However, moving or refinancing before that point may trigger repayment of some or all of the balance.
Forgivable loans typically eliminate a set percentage of the debt each year. A common example is a five-year forgivable loan that forgives 20% of the balance annually — meaning if you refinanced after three years, you’d still owe 40% of the original balance.
Some grants may also require repayment if you sell the home. In most cases, simply refinancing should not trigger this requirement — but it’s worth reviewing your grant terms carefully, especially if you’ve owned your home for only a couple of years.
Considering Home Improvements?
If you don’t have enough equity to wrap your DPA loan but have home improvements planned, a renovation refinance loan might help. These loans allow you to refinance based on your home’s projected value after improvements, potentially giving you the equity needed to roll your DPA balance into the new mortgage. Keep in mind that renovation loans involve additional documentation and aren’t offered by all lenders.
Ready to Refinance? Start With Refi.com
If you received down payment assistance — whether it’s deferred, forgivable, or actively being repaid — there’s a good chance you’ll need to address that balance when you refinance. But in many cases, homeowners can wrap it into their new loan as long as they have sufficient equity.
Start your refinance application with Refi.com today and we’ll help you understand your options and find the best path forward for your situation.
