Seller Financing Calculator
When the seller becomes the bank: monthly payment, balloon balance, and total interest.
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Sam's Take
Seller financing is the most underused tool in real estate. When a seller has owned a property a long time and doesn't need a lump sum, they often prefer monthly payments at a higher rate than CDs. You get easier qualification (no bank), faster close (no underwriting), and sometimes lower down payment. The catch: balloon. Most seller-financed deals balloon in 5-10 years, meaning you have to refi or pay off the balance all at once. Plan the exit before you sign the note.
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What seller financing actually is
Seller financing — sometimes called "owner financing" or a "seller carry-back" — is when the seller of the property acts as the bank. Instead of the buyer getting a mortgage from a lender to pay the seller in full at closing, the buyer puts down a down payment directly to the seller, and then makes monthly payments to the seller until the loan is paid off or hits a balloon. The seller holds a mortgage (or deed of trust, depending on the state) on the property just like a bank would, and can foreclose if the buyer defaults.
It's a useful tool when a normal bank loan isn't available or isn't the right fit. Both sides can win on the right deal.
Why both sides sometimes prefer it
For the seller: monthly income at a much higher interest rate than savings accounts or CDs would pay. The capital gain on the sale gets spread over years through installment sale rules, which can lower their tax bill in the year of sale. And it makes the property sellable when it wouldn't qualify for a conventional buyer — older buildings with code issues, properties with unusual zoning, mid-rehab projects, or just buildings the bank would reject.
For the buyer: easier qualification (no bank underwriting on income, DTI, credit), faster close (often 7-14 days vs 30-45), lower closing costs (no bank fees, no appraisal often), and negotiable terms — down payment, rate, amortization period, and balloon are all up for discussion in a way nothing about a bank loan ever is. For a self-employed investor or someone whose tax returns don't show meaningful income, this can be the only way to buy.
The balloon problem — read this twice
Most seller-financed loans are written to amortize on a long schedule (often 30 years) so that the monthly payment is low and affordable, but they balloon at year 5 or year 10 — meaning the entire remaining balance is due in one shot at that point. The buyer's plan is supposed to be: refinance with a bank before the balloon hits.
That plan only works if (a) bank financing is available at that point, (b) the property qualifies, and (c) the buyer's financial situation supports a refinance. Any of those can break. Rates can be higher. The market can have softened. The buyer's income can have changed. The property might have an issue that won't survive a bank appraisal. If the refi doesn't happen, the seller can foreclose, and the buyer loses every dollar of equity built up to that point.
Always — always — plan the exit before signing the note. If you can't articulate clearly how you're going to pay off the balloon when it hits, don't take the deal. A safer alternative when you can negotiate it: a fully amortizing seller-financed loan with no balloon. The rate may be higher but the structural risk is gone.
Wraparound structures and due-on-sale clauses
Watch for "wraparound" deals — where the seller still has their own underlying mortgage on the property and your seller-financed loan effectively wraps around theirs. Most bank mortgages contain a "due-on-sale" clause that technically lets the original lender call the loan immediately if the property changes hands. In practice, banks rarely enforce these as long as payments keep coming — but the risk is real, and worth understanding before structuring a wrap. If the original lender ever decides to enforce, the whole structure can collapse.