Mayor Linda Gorton proposes $1 million in home loans for 15 to 20 first-time buyers: up to 25% of the price, with no interest and no monthly payments.

Lexington wants to lend first-time homebuyers part of the price of a home, with no interest and no monthly payments. Mayor Linda Gorton proposed the Shared Appreciation Mortgage loans Tuesday, Oct. 27, the city announced.

The city has set aside $1 million for the program, with the support of the Urban County Council. The city said that is enough to help 15 to 20 first-time buyers.

“This is a new route to making homes more affordable for people with lower incomes. If it proves to be effective, we can always invest more in the future,” Gorton said.

How the loans work

The city will run the program with Kentucky Housing Corp., which recently started it statewide. According to the city’s announcement:

  • the loan is a second mortgage of up to 25% of the purchase price
  • it carries no interest and no monthly payments
  • buyers must earn at or below 80% of median income
  • the home must be in Fayette County
  • buyers must complete a homeownership counseling class first

Because the second mortgage covers part of the price, the first mortgage is smaller, and so is the monthly payment. On a $300,000 home, a loan of 25% would be $75,000.

How it is paid back

The loan comes due when the owner sells the home, pays off or refinances the first mortgage, pays off the second loan, or faces foreclosure on the first mortgage, the city said.

The owner then repays the original amount plus a percentage of the home’s increase in value. The city said that money would then be used to help another family.

Kentucky Housing Corp. says on its Shared Appreciation Mortgage page that the share of the gain is “calculated based on how much SAM assistance was provided.” If the home does not rise in value, there is no gain to share and only the original loan is repaid. If the home sells at a loss, the full loan is still owed, the agency said.

What the state program requires

Kentucky Housing Corp.’s statewide version has limits the city’s announcement does not mention. On its program page, the agency says the loans are:

  • for first-time homebuyers only
  • for newly built homes only
  • for owner-occupied homes, not rentals or investments

Its required homebuyer education course costs $35, paid to the training provider, eHome America. The city has not said whether Lexington’s loans will follow the same new-construction rule, or when buyers can apply.

What it means for you

If you rent in Lexington and earn at or below 80% of median income, this could cut what you borrow on your main mortgage by up to a quarter of the price. That lowers your monthly payment.

The pool is small. One million dollars covers 15 to 20 buyers, so the loans are likely to go quickly once they open.

The city said to ask any lender that takes part in the Kentucky Housing Corp. program. The agency lists them in its lender directory. Its main line is 502-564-7630.

The typical Lexington home was worth $331,087 in September 2026, according to Zillow Research. For prices, trends and what homes cost by type, see our page on Lexington home prices, and for the tax bill that comes with a home, Lexington property taxes.