Estimate the monthly payment and balloon balance on a seller-financed note from price, down payment, rate, and term.
With seller financing(also called owner financing or a seller carryback), the seller acts as the bank: instead of you getting a mortgage, the seller carries a note and you make monthly payments to them directly. It’s common in creative real estate deals where a buyer wants flexible terms or can’t — or doesn’t want to — use a conventional lender.
You and the seller agree on a price, down payment, interest rate, and an amortization schedule. The monthly principal-and-interest payment is calculated on that schedule — often a 30-year amortization to keep payments low — but the loan frequently includes a balloon: the remaining balance comes due in full after a set number of years, at which point you refinance or sell.
On a $300,000 home with 10% down ($30,000), you finance $270,000 at 7% amortized over 30 years — about $1,797 a month in principal and interest. If the note has a 5-year balloon, roughly $254,000comes due in year five, when you’d typically refinance into a long-term loan. Adjust the inputs above for your own terms.
It can mean a faster close, lower closing costs, negotiable terms, and a path for buyers who don’t fit conventional underwriting. The trade-offs: sellers often want a higher rate or a balloon, you need an exit plan before that balloon date, and you should always paper the deal with a real estate attorney. Have a refinance plan ready — a DSCR loan is a common way investors refinance a balloon on a rental.
Before you sign a seller-financed note with a balloon, know how you’ll pay it off. When the balloon nears, get matched with investor-friendly lenders to refinance, and screen the deal’s economics with the Cap Rate and Rental Cash Flow calculators.
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Get MatchedIn seller financing (also called owner financing or a seller carryback), the seller acts as the lender. Instead of getting a mortgage, the buyer makes monthly payments directly to the seller under agreed terms — price, down payment, interest rate, amortization, and often a balloon.
The monthly principal-and-interest payment is calculated on the financed amount (price minus down payment) using the agreed interest rate and amortization schedule — the same way a mortgage payment is amortized. Taxes and insurance are handled separately.
Many seller-financed notes amortize over a long period (often 30 years) to keep payments low but require the remaining balance to be paid in full — a balloon — after a few years. The buyer typically refinances or sells the property before the balloon comes due.
Rates are negotiable and often run above conventional mortgage rates because the seller is taking on the financing risk. The exact rate depends on the parties, the down payment, and the deal; always document the terms with a real estate attorney.
It can mean a faster close, lower closing costs, and flexible terms, and it helps buyers who don't fit conventional underwriting. The trade-offs are higher rates, balloon risk, and the need for solid legal paperwork and a clear exit plan.
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