About the Seller Financing Calculator
In seller (owner) financing, the seller acts as the bank: the buyer makes a down payment and then pays the seller monthly on a promissory note secured by the property. This calculator builds that note. Enter the price, down payment, interest rate and amortization period, then add a balloon year to see the lump sum due when the note matures.
Seller-carry notes usually amortize over 20–30 years to keep payments affordable but come due after 3–10 years, when the buyer is expected to refinance with a bank or sell. The calculator shows the monthly payment, the balance owed at the balloon, the interest the seller earns and the total the seller receives including the down payment. An interest-only option covers notes where the buyer pays only interest until the balloon.
Buyers can use it to judge affordability and plan a refinance; sellers can compare the income from carrying a note with a cash sale. Owner-financed home sales to consumers can fall under federal Truth in Lending (Dodd-Frank) loan-originator rules — with limited exemptions for sellers who finance only one to three properties a year, some of which bar balloon payments — as well as state usury limits, and an existing mortgage with a due-on-sale clause may need to be paid off, so have an attorney draft the note.
With the default inputs, the monthly payment is $1,796.32. Change any value above to recalculate instantly.
How to use the seller financing calculator
- 1Enter the agreed sale price and the buyer’s down payment.
- 2Set the interest rate on the seller-carried note.
- 3Choose the amortization period used to size payments.
- 4Enter when the balloon is due (0 for a fully amortizing note).
- 5Pick amortizing or interest-only payments and review the balloon and totals.
Formula and method
The amount the seller finances, L, is the sale price minus the down payment. For an amortizing note the payment M uses the standard mortgage formula with the monthly rate r (annual rate ÷ 12) and the full amortization period n in months, so payments look like a normal 30-year loan even when the note is much shorter.
If the note has a balloon after k months, the buyer owes the remaining balance at that point, found with the loan-balance formula. Interest paid equals total payments minus the principal repaid before the balloon. For an interest-only note the payment is simply L × r and the entire original balance is due at the balloon date. The seller’s total receipts are the down payment, all monthly payments and the balloon.
- L
- Amount financed (price − down payment)
- r
- Monthly interest rate
- n
- Amortization period in months
- k
- Months until the balloon is due
Worked examples
$300k sale, 10% down, 7% over 30 years with a 5-year balloon
The seller carries $270,000. Amortized over 30 years at 7%, the payment is $1,796.32. After 60 payments ($107,779 in total) the buyer still owes a $254,155 balloon. The seller collects $91,934 of interest and $391,934 in all.
Fully amortizing 20-year note at 6%
A $200,000 note at 6% over 20 years costs $1,432.86 a month with no balloon. Over 240 payments the seller earns about $143,887 of interest.
Interest-only note with a 3-year balloon
Interest-only on $340,000 at 8% is $2,266.67 a month. After 36 payments ($81,600, all interest) the full $340,000 is due as a balloon.
Frequently asked questions
How does seller financing work?+
The buyer pays a down payment and signs a promissory note to the seller, secured by a mortgage or deed of trust on the property. The buyer makes monthly payments to the seller, and the title transfers at closing just like a bank-financed sale.
What interest rate is typical for owner financing?+
Seller-financed notes often carry rates at or somewhat above bank mortgage rates because the seller takes more risk and the buyer may not qualify for a conventional loan. Rates must stay within state usury limits, and very low rates can trigger IRS imputed-interest rules.
What is a balloon payment in seller financing?+
A balloon is the lump-sum balance due when the note matures before it is fully amortized. For example, a note amortized over 30 years with a 5-year balloon has normal payments for five years, then the remaining balance is due in full.
What are the risks for the seller?+
If the buyer stops paying, the seller must foreclose to recover the property, which costs time and money. Sellers reduce risk by requiring a meaningful down payment, checking the buyer’s credit and income, and using an attorney and a loan servicer.
How is seller-financed interest taxed?+
The seller reports interest received as ordinary income. The gain on the sale can often be reported under the installment method, spreading the tax over the years principal is received (IRS Form 6252).
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.