Indiana down payment assistance is never forgiven
Program and regulatory figures verified October 5, 2026. Details change; confirm your scenario with us.
Most states forgive their down payment assistance eventually. Indiana does not, and planning as though it will is the most expensive mistake an Indiana buyer can make with this program.
What does non-forgivable actually mean here?
It means the balance never shrinks on its own. In a forgiving state, assistance behaves like a countdown: stay long enough and the lien clears. In Indiana the second mortgage simply sits there at full value until something makes it due, and then you write a cheque for the whole amount.
IHCDA puts both halves of this in writing. The program description says that on "termination of the first mortgage or the property no longer being used as a primary residence, the full amount of DPA must be repaid in full." Section 1 of the guide then closes the obvious follow-up question: "There is no proration associated with the IHCDA DPA loan."
Read those together and there is no interpretation left. Five years in or twenty-five, sell the house and the full assistance comes off the top.
How does that compare with other states?
Unfavourably, and that is worth saying plainly rather than burying. Indiana's assistance is easy to access and generous in size; what it is not is free.
| State | What happens to the assistance |
|---|---|
| South Carolina | Forgiven at 10 years |
| Missouri | Nothing for 5 years, then clears gradually |
| Ohio | Forgiven at 7 years, all at once |
| Indiana | Never forgiven. No proration. Repaid in full. |
This is why so many Indiana pages describe IHCDA assistance as a grant: the author has seen how the programme next door works and assumed Indiana matches. It does not.
What makes the second mortgage due?
The guide defines maturity as the first of these to occur during the full thirty years of the first mortgage.
- You stop using the property as your principal residence.
- You sell the property.
- You refinance the first mortgage, other than through a current or future IHCDA refinance programme.
- ★ You take out a home equity line of credit.
- You default on the first mortgage and foreclosure proceedings begin, or you breach another term of the second note.
The HELOC trigger is the one that catches people. Pulling equity out for a kitchen or a roof is an ordinary thing for a homeowner to do seven or eight years in, and in Indiana it calls the assistance due. Nothing has gone wrong; you have simply hit a clause almost nobody told you about.
IHCDA also will not subordinate the second to anything except the original first mortgage or an IHCDA refinance. So refinancing with another lender does not let you carry the assistance forward — it pays off.
So is it still worth taking?
Usually, yes. Mike's view after originating these: a non-forgivable second that sits quietly behind your first mortgage is still a very good way to get into a house years earlier than saving would allow, and the money you are not putting down is money you keep. The problem is never the structure. The problem is a buyer who thought it was a grant, sells in year six, and discovers at the closing table that $12,500 of their proceeds is spoken for.
Plan it as what it is — borrowed money you will repay from the sale — and the programme does its job. Which of the two paying programmes fits · The separate federal recapture tax.
Frequently asked questions
Is Indiana down payment assistance a grant?
No. Every IHCDA down payment assistance product is a non-forgivable second mortgage. IHCDA's Homeownership Program Guide dated 02/2026 states that the full amount must be repaid in full on termination of the first mortgage or when the property stops being the primary residence, and that there is no proration associated with the IHCDA DPA loan.When do I have to repay IHCDA down payment assistance?
On the first of these to occur during the thirty-year term: you stop using the home as your principal residence, you sell, you refinance the first mortgage outside an IHCDA refinance program, you take out a home equity line of credit, or you default and foreclosure proceedings begin.Does a HELOC trigger repayment of Indiana down payment assistance?
Yes. IHCDA's program guide lists using a home equity line of credit during the thirty-year term of the first mortgage as one of the events that makes the second mortgage due. This is unusual among state programs and is missed by most Indiana guidance.Can I refinance and keep my IHCDA down payment assistance?
Only through a current or future IHCDA refinance program such as Next Step. IHCDA will not subordinate the second mortgage to any other claim, so refinancing with a different lender pays the assistance off in full.Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal or tax advice. IHCDA program terms, income limits and acquisition limits are set by the Indiana Housing and Community Development Authority and change; figures here carry the date we verified them against IHCDA's published documents. IHCDA down payment assistance is a non-forgivable second mortgage repayable in full, not a grant. Federal recapture tax may apply on bond-funded loans; consult a tax advisor. Loans are subject to borrower and property qualification.