Seller Financing Calculator
Calculate owner financing payments, balloon amounts, and total costs. Compare buyer and seller perspectives, analyze installment sale tax benefits, and model wraparound mortgages.
$
$10%
%
Monthly Payment
$1,991
Fully amortized over 30 years
Loan Amount
$315,000
Total Interest
$401,765
Total Paid
$716,765
Advanced
Buyer vs Seller Analysis
Compare perspectives, bank vs seller financing, and balloon scenarios
Buyer Perspective
Monthly Payment: $1,991
Down Payment: $35,000
Loan Amount: $315,000
Total Interest Paid: $401,765
Total Cost: $751,765
Down Payment: $35,000
Loan Amount: $315,000
Total Interest Paid: $401,765
Total Cost: $751,765
Seller Perspective
Down Payment Received: $35,000
Monthly Income Stream: $1,991
Effective Yield: 6.5%
Total Interest Earned: $401,765
Total Return: $751,765
Monthly Income Stream: $1,991
Effective Yield: 6.5%
Total Interest Earned: $401,765
Total Return: $751,765
Seller Monthly Income
$1,991
Passive income stream
Effective Seller Yield
6.5%
Interest earned on loan
Seller Total Return
$751,765
Sale price + all interest
Buyer Break-Even vs Rent
$1,991
Monthly housing cost
Pro
Advanced Modeling
Full amortization schedule, installment sale tax analysis, wraparound mortgage
Full payment schedule on $315,000 at 6.5% over 30 years.
| Year | Annual Payment | Principal | Interest | Balance |
|---|---|---|---|---|
| 1 | $23,892 | $3,521 | $20,371 | $311,479 |
| 2 | $23,892 | $3,757 | $20,136 | $307,723 |
| 3 | $23,892 | $4,008 | $19,884 | $303,714 |
| 4 | $23,892 | $4,277 | $19,616 | $299,438 |
| 5 | $23,892 | $4,563 | $19,329 | $294,875 |
| 6 | $23,892 | $4,869 | $19,023 | $290,006 |
| 7 | $23,892 | $5,195 | $18,697 | $284,811 |
| 8 | $23,892 | $5,543 | $18,350 | $279,269 |
| 9 | $23,892 | $5,914 | $17,978 | $273,355 |
| 10 | $23,892 | $6,310 | $17,582 | $267,045 |
| 11 | $23,892 | $6,732 | $17,160 | $260,312 |
| 12 | $23,892 | $7,183 | $16,709 | $253,129 |
| 13 | $23,892 | $7,664 | $16,228 | $245,464 |
| 14 | $23,892 | $8,178 | $15,714 | $237,287 |
| 15 | $23,892 | $8,725 | $15,167 | $228,561 |
| 16 | $23,892 | $9,310 | $14,582 | $219,251 |
| 17 | $23,892 | $9,933 | $13,959 | $209,318 |
| 18 | $23,892 | $10,599 | $13,294 | $198,720 |
| 19 | $23,892 | $11,308 | $12,584 | $187,411 |
| 20 | $23,892 | $12,066 | $11,826 | $175,346 |
| 21 | $23,892 | $12,874 | $11,018 | $162,472 |
| 22 | $23,892 | $13,736 | $10,156 | $148,736 |
| 23 | $23,892 | $14,656 | $9,236 | $134,080 |
| 24 | $23,892 | $15,637 | $8,255 | $118,443 |
| 25 | $23,892 | $16,685 | $7,208 | $101,758 |
| 26 | $23,892 | $17,802 | $6,090 | $83,956 |
| 27 | $23,892 | $18,994 | $4,898 | $64,962 |
| 28 | $23,892 | $20,266 | $3,626 | $44,695 |
| 29 | $23,892 | $21,624 | $2,269 | $23,072 |
| 30 | $23,892 | $23,072 | $820 | $0 |
How Seller Financing Works
Seller financing (also called owner financing or a seller carryback) is when the property seller acts as the lender. Instead of the buyer getting a mortgage from a bank, the seller extends credit directly. The buyer makes monthly payments to the seller, who holds a promissory note and deed of trust (or mortgage) against the property.
- Sale Price: The agreed purchase price — same as any real estate transaction.
- Down Payment: Cash paid at closing. Sellers typically require 5-20% down to create equity cushion.
- Interest Rate: Set by negotiation. Usually below prevailing bank rates — a key buyer benefit. Must meet IRS AFR minimum to avoid imputed interest.
- Amortization Term: Usually 15-30 years for payment calculation purposes.
- Balloon Payment: Many seller-financed notes have a balloon (lump-sum payoff) due in 3-10 years, requiring the buyer to refinance with a bank by then.
Seller Financing Formulas
Loan Amount = Sale Price − Down Payment
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n − 1]
where r = annual rate / 12, n = term in months
Balloon Balance = Remaining principal after balloon period
Seller Effective Yield = Interest Rate on Note
Installment Sale Gross Profit Ratio = Capital Gain / Sale Price
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n − 1]
where r = annual rate / 12, n = term in months
Balloon Balance = Remaining principal after balloon period
Seller Effective Yield = Interest Rate on Note
Installment Sale Gross Profit Ratio = Capital Gain / Sale Price
Why Sellers Offer Seller Financing
- Faster sale — reaches buyers who can't get bank loans
- Higher sale price — buyers pay more for easy terms
- Monthly income stream at better yield than savings accounts
- Installment sale tax benefit — spread capital gains over many years
Example: Seller Financing Deal
The Pine Street Seller Carryback
| Sale Price | $350,000 |
| Down Payment (10%) | $35,000 |
| Seller Loan Amount | $315,000 |
| Interest Rate | 6.5% (vs 7.5% bank) |
| Term | 30-year amortization, 7-year balloon |
| Monthly Payment | $1,991 |
| Balloon Balance (Yr 7) | ~$285,000 |
| Buyer Total Interest (7yr) | ~$132,000 |
| Seller Monthly Income | $1,991 for 7 years |
| Seller Effective Yield | 6.5% on $315,000 |
The buyer saves $94/month vs bank financing at 7.5%, plus avoids ~$8,000 in origination fees. The seller earns $167,244 in payments plus the $285,000 balloon — a total of $452,244 on a $315,000 investment over 7 years.
Frequently Asked Questions
Seller financing can be faster and more flexible than bank financing, but it carries different risks for both parties. Buyers face less regulatory protection and the risk of a balloon payment they can't refinance. Sellers face the risk of buyer default and the need to foreclose — a lengthy and expensive process. Both parties should use a real estate attorney to properly document the transaction with a promissory note and deed of trust.
A balloon payment means the monthly payments are calculated based on a long amortization (e.g., 30 years) but the entire remaining balance is due in a shorter period (e.g., 5-10 years). Sellers use balloons to limit how long their capital is tied up. Buyers must refinance or pay off the balloon when it comes due — if rates have risen or their credit has declined, this can be a serious problem.
Under IRS installment sale rules (IRC Section 453), a seller who finances the buyer can spread capital gains recognition over the years they receive principal payments rather than paying tax on the full gain in the year of sale. The gain is recognized proportionally using the "gross profit ratio" (gain ÷ sale price). This can provide significant tax deferral. Consult a CPA for your specific situation.
A wraparound mortgage occurs when a seller who still has an existing mortgage creates a new, larger loan to the buyer at a higher interest rate. The seller collects the buyer's payment, pays their underlying lender, and keeps the spread. It's riskier because most conventional mortgages have a due-on-sale clause — if the lender discovers the transfer, they can demand immediate payoff. Wraparounds are most common on properties with assumable loans or in states where they're legally recognized.
The seller's rate should be negotiated based on prevailing bank rates, the buyer's creditworthiness, and the seller's desired return. The IRS publishes the Applicable Federal Rate (AFR) monthly — seller financing must charge at least the AFR or the IRS will impute the minimum rate, treating some principal as interest income. Most seller-financed deals price 0.5-2% below current bank rates to incentivize the buyer while still providing the seller a good return.