Owner carry · Purchase-money mortgage
Seller financing
Seller financing is when the seller acts as the bank: you pay a down payment and sign a promissory note secured by the property, then pay the seller monthly. Terms are negotiated rather than underwritten, which is why owner-carry deals often have below-market rates paired with a balloon due in five to ten years.
Note amount = purchase price − down payment
Worked example
10% down on $265,000 leaves a $238,500 note at 5.5% on a 30-year amortisation with a balloon at year 7.
Rental metric examples use the default $265,000 duplex at $2,650 monthly rent, 25% down and 6.75% over 30 years. Strategy and tax examples use the assumptions stated above rather than that rental deal.
The mistake to avoid
Where this is calculated
The seller financing calculator computes this from your own numbers and shows the arithmetic expanded. Owner-carry notes: payment, balloon balance, interest to the balloon, and what the seller nets versus a cash sale.
Related terms
- Debt service coverage ratioDSCR is net operating income divided by annual debt service.
- Loan-to-valueLoan-to-value is the loan balance divided by the property's appraised value.
- Debt serviceDebt service is the total of principal and interest paid on the loan over a year.
Back to the full glossary — 21 terms with formulas and worked examples.