Q: When I bought my home, I participated in a homebuyer assistance program. I do not need to make payments, but I must pay back the total amount when I sell the home. I was drafting my will and was wondering if my heirs would need to pay back the money after I pass away? What if I deed my house to my kids as a gift? — Maryann
A: There are many programs like this, and they all work differently from one another.
If yours is like most I have seen over the years, it acts like a payment-free second mortgage. As long as the homeowner remains in the house, no payment is due. But if they sell the property, move out, or die, the total amount becomes due.
Some of these programs allow the debt to be forgiven if the homeowner lives on the property for a long time, such as 20 or 30 years.
While it may vary, most are designed to help low-income homebuyers make their home in economically challenged areas.
Because there are so many variations, you will need to carefully review the terms of the program you are participating in to know its specific rules.
When you have any type of lien on your property, it travels with the property no matter who owns it.
For example, if you have a mortgage on your home and sell, the mortgage stays with the house until it is paid off.
The same thing applies to leases. If you rent a property and the landlord sells the house, your lease does not change; only who you pay rent to.
The assistance program, and the second mortgage related to it, will need to be followed if you bequest your house in a will or give it away as a gift.
