A soft second loan is a second mortgage used to help a homebuyer cover the down payment, closing costs, or part of the purchase price. It is called “soft” not because it is physically squishy, of course, but because it is very flexible; the repayment terms are usually more flexible than those of a standard loan. Depending on the program, the loan may have little or no interest, and monthly payments may be deferred.
In many cases, the loan does not need to be repaid until the homeowner sells the property, refinances the first mortgage, moves out, or reaches the end of the loan term. Some soft second loans may even be partially or fully forgiven if the homeowner meets certain requirements, such as living in the home for a set number of years. The exact rules vary by program, so buyers should review the repayment and forgiveness terms carefully.
Soft Second Loan
