GetToolr

How to Use This Calculator

Enter the purchase price, down payment, interest rate, and amortization period. Set the balloon term to see when the lump-sum payment comes due and how much it will be. If the deal involves a wrap mortgage, toggle it on and enter the seller's existing mortgage details to see the monthly spread.

Calculator

Seller Finance Term Modeler

Model seller-financed deals with balloon payments, interest-only periods, and wrap mortgages.

Deal Terms

$
%
%
yr
yr
mo

Wrap Mortgage

Payment Schedule

PeriodPaymentPrincipalInterestBalance
Mo 1$1,079$179$900$179,821
Yr 1$1,079$189$890$177,790
Yr 2$1,079$201$878$175,443
Yr 3$1,079$213$866$172,951
Yr 4$1,079$227$853$170,306
Yr 5$1,079$240$839$167,498

Monthly Payment

$1,079

Balloon Payment (Year 5)

$167,498

Equity at balloon: $32,502 (16.3%)

Deal Summary

Loan Amount$180,000
Down Payment$20,000
Total Interest Paid$52,249
Total Payments$64,751

When Seller Financing Makes Sense

For buyers

  • You cannot qualify for a conventional mortgage (self-employed, low credit, recent bankruptcy)
  • You want to avoid bank fees, appraisals, and lengthy approval processes
  • You want creative terms like interest-only periods or lower down payments
  • You are buying from a motivated seller who owns the property free and clear

For sellers

  • You want to spread capital gains tax over multiple years (installment sale)
  • You want passive income from the monthly payments at a higher return than bonds or savings
  • Your property is not selling through traditional channels
  • You have a wrap mortgage opportunity where you can earn the rate spread

Understanding Balloon Payment Risk

The balloon payment is the biggest risk in seller-financed deals. When it comes due, the buyer must either pay it in full, refinance into a conventional mortgage, or negotiate an extension with the seller. If interest rates have risen or the buyer's credit has not improved, refinancing may be difficult or expensive.

Before entering a seller-financed deal, have a clear plan for the balloon. Know what credit score and income documentation you will need to refinance. Build equity during the loan term so you have enough for conventional financing when the balloon comes due.

Due-on-sale clause

Wrap mortgages carry a legal risk. Most conventional mortgages have a due-on-sale clause that allows the lender to demand full repayment if the property is sold or transferred. While lenders rarely enforce this if payments are current, it is a risk both parties should understand and discuss with an attorney.

Frequently Asked Questions

What is seller financing in real estate?
Seller financing is when the property seller acts as the lender instead of a bank. The buyer makes monthly payments directly to the seller based on agreed terms (interest rate, amortization period, balloon date). It is common when buyers cannot qualify for traditional financing or when sellers want to spread out their capital gains tax.
What is a balloon payment?
A balloon payment is a large lump-sum payment due at the end of the seller-financed loan term. For example, a deal might have monthly payments based on a 30-year amortization but require full payoff in 5 years. At year 5, the remaining balance (the balloon) must be paid, usually by refinancing into a conventional mortgage.
What is a wrap mortgage?
A wrap mortgage (or wraparound mortgage) is when the seller finances the buyer while keeping their existing mortgage in place. The buyer's payment covers the seller's underlying mortgage plus a spread. For example, the buyer pays 6% interest to the seller, who still pays their original 3.5% mortgage. The seller earns the 2.5% spread on the full loan amount.
What interest rate is typical for seller financing?
Seller-financed deals typically carry interest rates of 5-8%, depending on the buyer's creditworthiness and market conditions. Rates are usually higher than conventional mortgages because the seller is taking on more risk, but lower than hard money loans.

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