Homebuyer lesson · Georgia
When and how you repay Georgia Dream assistance
Georgia Dream's down payment help is a 0% second mortgage, not a grant. Here is when it comes due, what a payoff looks like, how the federal recapture tax works, and how forgivable local programs compare.
What you're actually signing
A lot of people hear "down payment assistance" and picture a gift. Georgia Dream's assistance is closer to a patient loan. DCA's own homebuyer page says plainly that it's "not a grant." Here are the terms:
- 0% interest. The balance never grows.
- No monthly payment. It doesn't affect your monthly budget.
- Not forgivable. The full amount comes due at a triggering event.
- Recorded as a second mortgage, closed together with your first mortgage in the name of the Georgia Housing and Finance Authority.
Repaid money goes back into the program to help the next buyer. Once you understand the triggers, this kind of loan is easy to plan around.
The three things that make it due
| Trigger | What happens |
|---|---|
| You sell or transfer the home | The balance is paid from your sale proceeds at closing, like any other lien |
| You refinance your first mortgage | The balance is paid off as part of the refinance |
| The home stops being your main residence | The balance is due, for example if you move out and rent it |
There's no prepayment penalty on the Georgia Dream first mortgage, per DCA. For payoff figures on either loan, DCA directs owners to the servicer, State Home Mortgage.
What a payoff looks like: an example
Let's use round example numbers only. A school counselor in Macon buys a $200,000 home with an FHA loan and receives PEN of $12,000 (6% of the price, under the $12,500 cap). Seven years later she sells for $245,000.
- She owes the remaining first-mortgage balance, paid from the sale.
- She owes the PEN second mortgage: still exactly $12,000, because it carried 0% interest.
- She pays her selling costs.
- Whatever's left is hers.
Because the second never grows, it gets smaller relative to the home's value over time. If you'd like to estimate your own payoff at different sale prices, the what would I owe tool does the arithmetic.
Refinancing later
If rates drop and you want to refinance, plan on paying off the second mortgage as part of the new loan or from savings. That can make a small rate drop less worthwhile, since you'd be adding the assistance balance to your new loan amount. Ask a lender to show you both versions side by side: refinance with the payoff, and staying put.
Moving out or renting the home
Life changes. A new job across the state, a growing family or military orders can all mean a move. If you keep the home and rent it out, it's no longer your main residence, and the assistance becomes due. Selling works the same way you'd expect. Military families should read the PCS section of our guide to buying near Georgia's bases.
The federal recapture tax, in plain terms
Georgia Dream's first mortgage is funded with tax-exempt mortgage revenue bonds. Under IRS rules, that kind of below-market loan can bring a "recapture tax" if you sell within the first 9 years. Your lender discloses it at closing. Here's why most people never pay it. All three of these must be true:
- You sell at a gain. If you sell at a loss, there's no tax.
- Your income in the year of sale is above the limit in the notice you got at closing. At or below it, there's no tax.
- The formula produces an amount: 6.25% of the original subsidized loan amount, scaled by how long you held the home and how far your income is over the limit.
Even when it applies, the tax is capped at 50% of your gain. It's reported on IRS Form 8828 with your federal return for the year of sale. Refinancing without selling doesn't trigger it, and transferring the home to a spouse in a divorce doesn't either. Gifting the home is treated as a sale at fair market value.
Keep the recapture notice from your closing package. It holds the income limits you'd need if the question ever comes up.
How forgivable local programs compare
Several Georgia city and county programs forgive their assistance if you stay long enough. Here's how they stack up against Georgia Dream:
| Program | How it ends |
|---|---|
| Georgia Dream (PEN, CHOICE, Standard) | Repaid in full on sale, refinance or move-out |
| ATL HomeNOW (Invest Atlanta) | Forgiven after 10 years as your main home |
| Fulton Homeownership Program | 20% forgiven per year; Fulton's own documents differ on the total period |
| Gwinnett Homestretch | 5-year loan, 20% forgiven each year |
| Clayton County DPA | Forgiven after 5 or 10 years, depending on amount |
| Cobb County DPA | A grant with no lien |
| Savannah DreamMaker | 2% deferred loan over 30 years |
Forgivable doesn't automatically mean better. A forgivable program with a lower price cap or a tight savings limit may not fit your home, and you can't always combine it with Georgia Dream. Our program combination guide lays out those rules.
A note about the PEN amount
DCA raised PEN to 6% or $12,500 effective February 8, 2024, and an older DCA flyer described that increase as temporary. The July 8, 2026 terms still list it with no end date. If you're buying soon, the current amount is the one that matters. It's one more reason not to wait on a decision you're otherwise ready to make.
Keep these papers
- Your second mortgage note and security deed
- The recapture tax notice
- Your final Closing Disclosure
- Contact details for State Home Mortgage
Knowing the exit rules up front is part of buying well. When you're ready to see what you'd receive, check your eligibility.
Questions we hear a lot
Is Georgia Dream assistance forgiven?
No. It is a 0% second mortgage with no monthly payment that you repay in full when you sell, refinance your first mortgage or stop living in the home as your main residence.
Does the Georgia Dream second mortgage grow with interest?
No. It carries 0% interest, so you owe the same amount you received, however long you keep the home.
Will I owe recapture tax if I sell in five years?
Only if you sell at a gain and your income that year is above the limit in your closing notice. Even then, the tax is capped at 50% of your gain.
Who do I contact for a payoff amount?
DCA directs Georgia Dream borrowers to its servicer, State Home Mortgage, for payoff figures on both the first and second mortgage.
