Many people who sell still owe something on the house. What trips sellers up is the detail: the payoff is higher than your statement balance, a home equity line needs its own payoff, and the escrow refund comes later.

This guide takes those in order, then covers the harder case: owing more than the house will sell for.

Can you sell a house in Michigan while you still have a mortgage on it?

Yes. A mortgage is a lien on the house, not a lock on it. When the house sells, the loan is paid from the price, the lien is released, and the buyer takes the house free of your loan.

Our FAQ says the same thing: a mortgage, liens or other debts don't automatically rule a sale out. They're paid from the sale at closing, on a sale to us or a listing.

The number that matters is the gap between the sale price and what it takes to pay the loan off. If the price covers the payoff and the selling costs, the rest is yours. If not, you have a shortfall to plan for, covered below.

Keeping your mortgage and carrying a loan for the buyer yourself is a different setup with its own risks. We explain it in owner financing when you still have a mortgage.

What happens to your mortgage at the closing table?

The title company or closing agent takes the buyer's money, pays off your loan and the other costs of the sale, and sends you the rest. You don't need cash on hand to clear the loan.

Before closing: the title company asks your servicer for a payoff statement, with your written authorization.
At closing: the payoff comes off the sale price on your side of the settlement statement, with any other liens and your share of the costs.
After closing: the payoff goes to your servicer, and the lender sends a discharge to the county register of deeds to be recorded, which clears the lien from the public record.
Later: what's left in your escrow account comes back from the servicer, separate from your sale proceeds.

Keep making your regular payments until you close. A missed payment and any late fee don't disappear at closing. They show up in the payoff.

How do you find your real payoff amount, and why is it higher than your balance?

Ask your servicer for a payoff statement in writing, or have the title company ask for you. It runs higher than your statement balance because it adds the interest owed up to the day the loan is paid, plus any unpaid fees.

The CFPB notes that your monthly balance may not reflect what you actually owe. The payoff can also include a prepayment penalty if your loan has one.

Under federal Regulation Z, your servicer has to send the payoff statement no later than seven business days after a written request from you or someone acting for you, with a few exceptions covered in the FAQ below. The rule covers home equity lines too.

Each statement is figured to a specific date, so if closing moves, the interest moves with it:

Ask for the daily interest amount, often called per diem, so you know what each day of delay adds.
Get a fresh statement if the date slips, so an old figure doesn't leave a shortfall at closing.

Older FHA loans have one more wrinkle. Before a HUD rule, FHA lenders could charge interest through the end of the month the loan was paid off. For FHA loans closed on or after January 21, 2015, interest runs only to the payoff date. If yours is older, ask your servicer how it figures interest at payoff.

What if you also have a HELOC or a second mortgage?

Each loan against the house gets its own payoff, and each is paid from the sale at closing. A home equity line of credit (HELOC) adds one step: the line has to be closed, so nothing can be drawn on it after the payoff is set.

The CFPB's HELOC booklet says that when you sell, you're generally required to pay off the line in full right away. A second mortgage or home equity loan is handled like the first mortgage.

Chase's guide to selling with a HELOC says the line has to be closed before the sale is final. In practice:

Stop drawing on the line once you decide to sell, so the payoff stays accurate.
Ask the HELOC lender in writing what it needs from you to close the account at payoff.
Check for fees. Some plans charge an early termination fee, and annual or lien release charges can show up in the payoff.
Confirm the release after closing. The HELOC lien should be discharged at the register of deeds, the same as the first mortgage.

What if you owe more than the house is worth?

Then the sale price can't cover the payoff, and the difference has to come from somewhere. A cash sale is usually not the answer here, and we'd rather say so now.

Say the house would sell for $130,000 and your loans add up to $150,000. That $20,000 gap, plus selling costs, has to be settled before the lenders release their liens. Chase lists the usual routes:

Bring cash to closing to cover the difference.
Convert a leftover HELOC balance into an unsecured personal loan, if the lender offers it. That removes the lien, and terms vary.
Ask for a short sale. The CFPB defines it as selling your home for less than you owe on the mortgage, with the lender's agreement. Approval is strict and can take months, and with two loans, both lenders have to agree.
Wait, if you don't need to move. Payments and time can close the gap.

A short sale has two catches. The lender may still be able to collect the deficiency, the part of the debt the sale didn't cover, so the CFPB advises asking for a written waiver before closing. And the IRS generally treats canceled debt as taxable income. Its exclusion for a main home covers only debt discharged before January 1, 2026, or under a written arrangement made before then, so talk to a tax adviser before you sign.

Here is where we fit. If your payoff is higher than our cash offer, a sale to us won't close the gap. Our price is fair but not always full market value, so a listing may cover a loan our offer can't, and a short sale is built for the case where nothing covers it. We'll be upfront about that when we see your numbers.

For more, read what a short sale is and how it helps, and talk to a Michigan real estate attorney or a HUD-approved housing counselor before you commit.

How does a cash sale compare with a listing when there is a mortgage to pay off?

The payoff is the same either way. What changes is the price, the costs that come out first, and how long the loan keeps charging interest:

Price: A listing reaches the open market and can bring full market value, especially for a house in good shape. Our cash offer is fair but not always full market value; for a house that needs work, it reflects the repair cost.
Agent commission: On a listing it's negotiable. Clever Real Estate's August 2026 survey put the Michigan average at 5.91% of the price for both agents combined, from 11 Michigan agents. Redfin's closed-sale data put the buyer's agent share alone at 2.52% on homes under $500,000 in the second quarter of 2025. A sale to us has no agent commission.
Transfer tax: It applies on either route. Wayne County lists $0.55 county plus $3.75 state per $500 of price, or $8.60 per $1,000. The purchase agreement says who pays it, so ask any buyer, us included.
Closing costs: On a listing, you pay your share of title and closing fees. On a sale to us, we cover the typical closing costs.
Repairs and showings: A listing means preparing the house, keeping it show-ready and answering repair requests after inspection. We buy as-is, with no repairs, cleaning or showings.
Interest while you wait: Each month on the market adds another payment. A sale to us can close in as little as 7 days, or on the date you choose.

As an example only, say a buyer pays $180,000 and your payoff on closing day is $110,000. At 5.91%, commissions come to about $10,640, and the Wayne County transfer tax, if you pay it, is $1,548. You'd keep about $57,800 before title and closing fees. Run the same math on a cash offer with your real payoff and compare.

If your house is in good shape and you have a few months, a listing may leave you more. We're the better fit when the house needs work, the timing is tight, or you'd rather skip showings. See how we buy houses for how a sale to us works.

Frequently asked questions

Do I need to pay off my mortgage before I sell?

No. The loan is paid from the sale at closing. The title company gets a payoff statement from your servicer, pays the lender out of the price and sends you the rest. Keep making your regular payments until closing day, since a missed payment and any late fee get added to the payoff. You only need cash of your own if the payoff and selling costs add up to more than the price.

How long does the lender take to send a payoff letter?

Under federal Regulation Z, the servicer has to send an accurate payoff statement within a reasonable time, and no later than seven business days after a written request from you or someone acting for you, such as the title company. The seven-day limit doesn't apply when the loan is in bankruptcy or foreclosure, is a reverse mortgage, or a natural disaster interferes. Then the standard is a reasonable time. Ask early so the figure is ready before closing.

Is there a prepayment penalty on Michigan mortgages?

Many loans have none, but check your note. For most home loans made since January 2014, federal rules allow a penalty only on certain qualified mortgages whose rate can't rise, capped at 2% of the amount prepaid in years one and two, 1% in year three, and none after. Fannie Mae won't buy a loan that has one. Michigan law also limits it on many first-lien home loans to 1% within three years. If your note has one, ask a Michigan real estate attorney.

Can I sell if I am behind on payments?

Often, yes. The missed payments, late fees and other unpaid charges are added to the payoff, so the sale has to cover a bigger number. If the loan is already in foreclosure, the seven-day payoff deadline gives way to a reasonable time, so ask for the statement early. Our guide for owners who are behind on their payments covers the first steps, and a HUD-approved housing counselor can help for free or at low cost.

Who pays off the HELOC when the house sells?

The sale does. The title company orders a payoff statement from the HELOC lender, as it does for the first mortgage, and pays both at closing. The CFPB says that when you sell, you're generally required to pay off a HELOC in full right away. Stop drawing on the line, ask the lender what it needs to close the account, and check for an early termination fee.

What happens to my escrow account after the sale?

The money in it is yours. Under federal Regulation X, once the loan is paid in full, the servicer has to return any escrow balance within 20 days, not counting weekends and legal public holidays. It comes from the servicer after closing, separate from your sale proceeds. The one exception is if you agree to move it into a new loan's escrow with the same lender or servicer.

See your numbers, on your timeline

If you'd like to see a cash offer next to your payoff, we can usually have a no-obligation offer to you within 24 hours, and you can weigh it against a listing at your own pace. Read how we buy houses, contact us, or call (313) 217-9851. No pressure, and no rush.

Can You Sell a House With a Mortgage? How the Payoff Works in Michigan