How do state down payment assistance programs (e.g. Virginia's) that charge interest actually work — does the state get interest on the home even after payoff?

If a program charges simple interest on a fixed balance and you pay that balance off, the interest stops. You do not owe the state interest forever on a home you own outright. Most city and state down payment assistance programs are funded through government bond financing, which is why they can carry below-market or even zero interest. The structure depends entirely on the specific program: - No interest at all. Some assistance loans never accrue interest. - A low fixed rate. Others accrue simple interest on the assistance balance. California's CalHFA, for example, has run both a zero-interest option and a separate modest fixed-rate second (confirm the current CalHFA lineup, since programs get added and retired). In most of these, nothing is due until you sell or refinance, at which point the balance plus any accrued interest comes due. - Shared appreciation or recapture. A different animal entirely: instead of simple interest, you owe a share of the home's appreciation at payoff. Read carefully which type you are being offered. None of these are free money, and the details vary a lot, so work with someone who runs these programs regularly and will walk you honestly through the pros and cons. That comparison is exactly what we do on the free Roadmap conversation (about 20 minutes) where we run your real numbers.