A “forgivable loan” is also called a “soft second.” Payment of the loan is forgiven or deferred for a period of time. The loan, or a portion of it, may be due when the property is sold. At the end of a stated period, the funds you were given to purchase the home are considered a grant.
For the New York City NSP2 Buyer Assistance Program, the loan is treated like a grant so long as you satisfy the restrictions during the required period of owner occupancy. The length of the period is 15 years regardless of the amount of the loan. Multi-unit properties have rental conditions that must be met for the loan to become an outright grant. If you do not comply with those restrictions or sell the property before the 15 year occupancy period is up, you may be required to pay back all or a portion of the loan. If you satisfy all conditions and remain in the home, the loan becomes an outright grant and all restrictions are lifted. There is no interest charged on the loan, even if called in.
Our counseling agency partners will help you secure a mortgage with a lender who understands how the NSP2 Program works and who will not have a problem with this forgivable loan.