Structuring an owner-financed sale
In seller financing (owner financing), the seller becomes the bank: the buyer puts money down, signs a promissory note for the balance, and pays the seller monthly. The most common structure is a long amortization — 20 to 30 years, to keep payments affordable — with a balloon in 3 to 10 years so the seller doesn't wait decades for full payoff. The schedule here truncates at the balloon date and shows the exact payoff amount owed.
Pricing the note
Seller-financed notes usually carry rates 1–3% above bank mortgage rates to compensate for risk and illiquidity. The calculator's effective yield figure is the internal rate of return the seller earns on the financed balance through the balloon or full term. Interest-only structures maximize monthly income but repay no principal — the entire note comes due at the balloon.
When the seller still has a mortgage
If the property still carries an existing loan, a straight owner-finance note gets complicated — that's exactly what a wraparound mortgage is for. Model it with the wraparound mortgage calculator, which tracks both loans, the payment spread, and the seller's true yield. New to the concept? Start with Seller Financing Explained.