What happens to your DPA second mortgage when you refinance — Arizona program rules
Most buyers don't ask about the refinance mechanics when they take DPA. Then 18 months later they want to refinance and discover the second mortgage either has to be paid off or subordinated — and the program may not let them subordinate.
Forgivable DPA second mortgages — refi rules
Home Plus and Home in Five Advantage seconds are typically forgivable over 3 or 5 years. They sit in second-lien position. When you refinance the first mortgage, the second-lien holder must agree to subordinate (stay in second position) or be paid off.
If the program permits subordination, you continue your forgiveness clock as if nothing happened. If subordination is denied or you sell, the unforgiven balance is due at the refi or sale closing.
Pay-back DPA second mortgages — refi rules
Chenoa Fund and similar pay-back programs structure the second as a true loan with payment terms. At refinance, the second is typically paid off from the proceeds — most refinance lenders won't allow it to stay because it complicates underwriting.
If the original program has prepayment penalty (rare in 2026), check the documentation before triggering refi.
Refinance timing strategy
| DPA program | Forgiveness period | Refi before forgiveness done? |
|---|---|---|
| Home Plus | 3 years | Subordinate; balance survives |
| Home in Five | 5 years | Subordinate; balance survives |
| Chenoa Fund 3.5% | 3 years | Usually pays off at refi |
| Chenoa Fund 5% | 3 years | Usually pays off at refi |
| Pathway to Purchase | 5 years | Subordinate possible; balance survives |
Common questions
Does an IRRRL count as a refinance for DPA purposes?
Yes. The DPA program will evaluate the subordination request the same as any refinance.
Can I refinance to remove PMI without touching the DPA?
Sometimes. If the program permits subordination on the original lien, yes. Otherwise the refinance will require DPA payoff.
What if my home appreciates enough that I no longer need DPA?
Forgivable seconds continue forgiving regardless of appreciation. Pay-back seconds remain a true debt until paid.
Does the lender refinancing me handle DPA subordination automatically?
No — borrower needs to request subordination from the original DPA program. The new lender provides the new mortgage details; you submit the subordination request separately.
How Mike + Cornerstone help
Refi strategy with DPA layered on top is one of the most common scenarios I help Arizona homeowners think through. We model the breakeven, the subordination feasibility, and whether forced payoff of the second wrecks the math. Sometimes the right answer is to wait 12 months for the forgiveness clock to complete first.
Talk to Mike first Get pre-approved
No pressure, no commitment. Free 20-minute consult. Mike will look at your scenario and tell you straight whether this works for you.