Compare seller financing (owner carryback) against a traditional mortgage. Calculate monthly payments, balloon payments, total interest, and see which deal saves you more money.
A buyer purchases a $350,000 home with 10% down ($35,000). Seller offers 6% interest on a 30-year term. Traditional mortgage rate is 6.5%.
Seller Payment: $1,888.58/mo
Traditional Payment: $1,991.75/mo
Monthly Savings: $103.17/mo · Total Interest Savings: $37,141 over 30 years
Seller financing also saves ~$3,000 in closing costs and avoids bank underwriting delays.
A buyer purchases a $500,000 property with 15% down ($75,000). Seller financing at 5.5% with a 5-year balloon (30-year amortization). Traditional rate is 6.75%.
Seller Payment: $2,413.31/mo
Balloon Payment Due: $396,316.42 at year 5
Traditional Payment: $2,756.76/mo
The balloon structure keeps payments low but requires refinancing or a lump sum at year 5. This is a common structure for buyers who expect to qualify for traditional financing later.
An investor buys a $200,000 rental property with 20% down ($40,000). Seller offers 7% on 20 years. Traditional investment property loan at 8% (higher than owner-occupied).
Seller Payment: $1,240.55/mo — Total Interest: $137,732
Traditional Payment: $1,338.28/mo — Total Interest: $161,187
Seller financing saves $97.73/month and $23,455 in total interest. Plus, seller financing may allow negotiation on price and terms that banks won't offer.
Seller financing (also called owner financing or seller carryback) is a real estate transaction where the seller acts as the lender. Instead of the buyer obtaining a traditional bank mortgage, the seller extends credit to the buyer, who makes monthly payments directly to the seller. This calculator helps both buyers and sellers evaluate whether a seller-financed deal is financially advantageous compared to a conventional mortgage.
When the amortization period is longer than the balloon term, monthly payments are calculated as if the loan will be paid over the full amortization period — but the remaining balance comes due in a lump sum at the balloon date. This is common in seller financing: a 5-year balloon with 30-year amortization keeps payments low while giving the seller their money back sooner.
A legal document where the buyer promises to repay the seller under the agreed terms. It specifies the interest rate, payment schedule, and consequences of default.
A security instrument that gives the seller the right to foreclose if the buyer defaults. It's recorded with the county and protects the seller's interest.
A large lump-sum payment due at the end of a balloon term. The buyer must either pay it in cash, refinance with a traditional lender, or negotiate an extension.
The number of years used to calculate the monthly payment. If longer than the balloon term, payments are lower but a large balance remains due at the balloon date.
Seller financing — also known as owner financing, seller carryback, or a purchase-money mortgage — is a real estate transaction where the property seller directly finances the buyer's purchase instead of (or in addition to) a traditional bank mortgage. The buyer makes a down payment and signs a promissory note agreeing to pay the seller in monthly installments, typically at an agreed-upon interest rate over a set term.
This arrangement is governed by a promissory note (the borrower's promise to pay) and secured by a deed of trust or mortgage (giving the seller the right to foreclose if the buyer defaults). Seller financing is most common when traditional lenders are unwilling to extend credit — for example, when the buyer has a non-traditional income source, the property doesn't meet lender standards, or when both parties want to avoid bank fees and delays.
According to the National Association of Realtors, seller financing accounts for approximately 6-8% of residential real estate transactions in the United States, with higher prevalence in rural areas and investment property markets. Typical seller financing interest rates range from 4% to 8% — generally 1-2 percentage points above prevailing conventional mortgage rates — reflecting the higher risk the seller assumes.
The seller finances the entire purchase price minus the down payment. The buyer makes monthly payments directly to the seller for the full term (often 15-30 years). No bank is involved.
Payments are calculated on a long amortization (e.g., 30 years) but the loan matures in a shorter period (e.g., 5 years). The remaining balance is due as a lump sum. This is the most common seller financing structure.
The seller has an existing mortgage and wraps the buyer's new loan around it. The buyer pays the seller, who continues paying the original mortgage. The seller profits from the rate spread.
The seller retains legal title until the buyer pays off the loan. The buyer gets equitable title and possession. Common when the buyer cannot qualify for traditional financing.
Choosing between seller financing and a traditional mortgage involves weighing trade-offs in cost, speed, flexibility, and risk. Here's how they compare across the dimensions that matter most to both buyers and sellers:
| Factor | Seller Financing | Traditional Mortgage |
|---|---|---|
| Interest Rate | 4-8% (typically 1-2% above bank rates) | 5-7.5% depending on credit and market conditions |
| Down Payment | 10-20% (negotiable, may be lower) | 3-20% depending on loan type (FHA: 3.5%) |
| Closing Costs | ~$1,500-$3,000 (no bank fees, origination, or underwriting) | ~$3,000-$7,000 (lender fees, appraisal, title, escrow) |
| Closing Timeline | 1-3 weeks | 30-60 days |
| Credit Requirements | Flexible — seller sets the terms | Strict — minimum credit scores, debt-to-income ratios |
| Property Standards | No appraisal required | Appraisal and inspection required |
| Tax Benefits (Seller) | Defer capital gains via installment sale | Receive full proceeds at closing; pay capital gains immediately |
| Risk | Buyer default risk for seller; foreclosure process required | Bank assumes default risk; buyer's credit at stake |
⚠️ Important Disclaimer: This Seller Financing Calculator is for informational and educational purposes only. Real estate transactions involve complex legal, tax, and financial considerations. Consult a qualified real estate attorney and tax professional before entering any seller financing agreement. Seller financing may be subject to federal and state regulations including the Dodd-Frank Act, SAFE Act, and state-specific usury laws. This calculator does not provide legal, tax, or financial advice.