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.
Every example in this glossary uses the same deal: a $265,000 duplex renting for $2,650 a month, bought with 25% down at 6.75% over 30 years, producing $19,310 of net operating income.
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 — 20 terms with formulas and worked examples.