What happens to my mortgage when I sell my house in Virginia?

Your mortgage does not follow the house to the next owner in most sales. The settlement agent pays your lender the full payoff amount from the sale proceeds at closing, and you take home what is left.

That sounds simple, and it is. The surprises come from the details: the payoff is not the same as the balance on your last statement, and the number that matters to you is the one at the bottom of the settlement statement, not the sale price.

How does the payoff work at closing?

The buyer’s money goes to the settlement agent, a title company or attorney in Virginia. That agent orders a payoff statement from your lender, pays off the loan, and sends you the remainder. The lender then releases its lien on the property.

You do not wire the lender yourself and you do not need to sell the loan to anyone. Your job is to make the payments on time until closing and answer the settlement agent’s requests promptly.

Why is the payoff different from my statement balance?

Interest on a mortgage is typically paid after it accrues, so your payoff includes interest from your last payment through the closing date. That is why a payoff statement lists a per-day interest figure, and why it changes if closing moves.

It can also include fees your lender charges to close out the loan, and it can differ if you have an unpaid late charge. Ask your lender for a written payoff statement before you list, not only the balance in your online account. You will use that number to estimate what you will net.

What do I actually walk away with?

Think of the sale price as the top line. From it come the payoff, the real estate commissions you agreed to, the Virginia grantor tax, any repairs or credits you negotiated, prorated taxes and your share of settlement charges. What remains is your net.

Our guide to what selling costs walks through the categories, and our FAQ answer on the Virginia grantor tax covers one of them. A net sheet built before you list shows the range, so a lower-than-hoped offer does not catch you off guard.

What if the sale price will not cover my loan?

Then the gap is real money. You can bring cash to closing, or you can ask your lender whether it will accept less than it is owed, which is called a short sale. A short sale needs lender approval and has consequences for your credit and sometimes your taxes.

This is a conversation for your lender and a Virginia real estate attorney before you list, not after you receive an offer. If you are close, an honest look at likely sale prices tells you whether you are in the zone where this matters.

Questions to ask your lender before you list

Ask for a written payoff statement and its good-through date. Ask whether the loan has any prepayment penalty, which is worth confirming in your note. Ask how and when any escrow balance is refunded after payoff.

If your loan is an assumable type, ask whether a buyer could take it over. Most buyers will not, but it is worth knowing before you set your price. For a closer look at the closing day itself, read what happens at a Virginia home closing.

What should I do next?

Pull your most recent loan statement and call your lender for a written payoff figure this week; then we can work backward from it to the price you need. Request a home value and we can work through a net sheet using your actual payoff, or ask for the Glen Allen office if you would rather talk it through. Written by Daniel Keeton, broker.