Owner Financing Calculator: Amortization Schedule and Balloon
Enter the price, down payment, rate, amortization and balloon to get the monthly payment, the balloon amount and a full owner financing amortization schedule. Add your basis to see the seller's tax each year, then flip one switch to compare the same schedule paid by a buyer who pays in full at closing. It also works as a seller financing or contract for deed calculator with a balloon payment. Everything runs in your browser.
Your numbers
The seller's tax
Installment method (Section 453) vs a cash sale.
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Adds the same principal schedule paid by a structured installment sale: the buyer pays the full price at closing, usually with a bank loan, and an assignment company pays you the financed amount on these dates. The payout rate is illustrative; the actual rate is set by the insurer on the day the structure is funded and reflects the commission built into its pricing.
Amortization schedule by year
Monthly amortization schedule
What to know before you choose it. A structured sale has to be set up before closing; a note you already hold cannot be converted. The payments are locked in: you can't speed them up, borrow against them, pledge them or cash them out, and that is what keeps the deferral intact. There is no free look after closing: once the sale closes, the structure cannot be undone. The payments depend on the assignment company's ability to pay. The installment method is settled law, but this specific assignment structure has no published IRS ruling, so have your CPA or tax attorney review the documents. A commission is built into the pricing: Hans is paid about 2.4% of the amount structured, only if a structured sale is funded; seller financing pays him nothing (disclosures).
Before you sign the contract
Get both options priced for your sale
Your note terms next to a structured sale quoted on the same schedule, with the tax on each, from a person, not a drip campaign. You can also call 213-340-2018.
- Real payout quotes on your schedule, not the illustrative rate above
- Seller financing, structured and cash compared honestly; your CPA stays in charge
- Seller financing pays the operator nothing; see the disclosures
How an owner financing amortization schedule works
In owner financing (also called seller financing or a seller carry-back), the seller is the lender. The buyer pays a down payment at closing and signs a promissory note for the rest, usually secured by a deed of trust or mortgage. Each monthly payment covers that month's interest on the unpaid balance first; the rest reduces the balance. Early payments are mostly interest, later ones mostly principal. The schedule above shows every month.
The payment formula
Payment = amount financed × r / (1 − (1 + r)−n), where r is the annual rate divided by 12 and n is the number of monthly payments in the amortization period. For $520,000 at 7% over 30 years, r = 0.5833% and n = 360, so the payment is about $3,460 a month.
Balloon payments
A balloon keeps the payment low (it is still based on the long amortization) but ends the note early: the balance left at the balloon date is due in one payment. On the example above with a 5-year balloon, roughly $490,000 is still owed after five years, because only about $30,000 of principal has been paid. Most buyers pay a balloon by refinancing, which is why a balloon note depends on the buyer's credit and on rates at that time. For an owner-occupied home, federal lending rules decide whether a seller may use a balloon at all: see seller financing rules and seller financing balloon payments.
The seller's tax each year
If at least one payment arrives after the year of sale, the gain is generally reported on the installment method (seller financing taxes). Each principal dollar is split by the gross profit ratio into taxable gain and tax-free basis, and interest is ordinary income. That is why a balloon year often carries the biggest tax bill: most of the principal, and most of the gain, arrives at once. The "Tax on the sale" column shows it year by year; the seller financing calculator adds recapture, loan payoff and an early payoff what-if.
The rate floor
The note should carry at least the applicable federal rate for its term. For a note paid in installments, the term is its weighted average maturity (Treas. Reg. §1.1274-4(c)(1)), which is shorter than the final due date: a 30-year amortization with a 5-year balloon averages under 5 years and is tested against the mid-term rate, while a fully amortizing 30-year note averages about 19 years and uses the long-term rate. For a sale, the test rate is the lowest AFR of the three months ending with the month of the binding contract (§1274(d)(2)). The calculator runs this test for you. See the current AFR table and imputed interest.
Same tax, no note to carry
The compare toggle shows the other way to get the same installment treatment: a structured installment sale. The buyer gets a normal loan and pays the full price at closing; you choose a payment schedule before closing and are paid by an assignment company. No buyer default, no foreclosure, no servicing, and no refinance that pays you off early and pulls the rest of the tax into one year. The trade: a fixed schedule and a lower rate. See seller financing vs a structured sale for the full comparison.
What this calculator leaves out
Monthly payments starting the month after closing, a fixed rate, no late fees, escrow, servicing costs or prepayment. Taxes assume real estate held more than a year, no loan payoff at closing, the 2026 tax tables carried forward, and no alternative minimum tax. Not tax or legal advice; have your CPA and a real estate attorney review your terms.
Owner financing calculator FAQ
How do you calculate an owner financing payment?
Use the standard level-payment formula: the amount financed times the monthly rate, divided by one minus (1 + monthly rate) raised to the negative number of monthly payments. The amortization period sets the payment. A balloon does not change the payment; it only means the balance still owed at the balloon date is due in one lump sum.
How does a balloon payment work in owner financing?
The note amortizes over a long period, often 20 to 30 years, to keep the payment affordable, but the whole remaining balance comes due after a shorter term, often 5 to 10 years. The buyer usually pays it by refinancing with a bank. If the buyer cannot refinance, the seller extends, renegotiates or forecloses. For owner-occupied homes, federal rules limit when a seller can use a balloon, so check the rules before you offer one.
What interest rate should an owner-financed note charge?
At least the applicable federal rate (AFR) for the note's term: short-term for notes up to 3 years, mid-term over 3 up to 9 years, long-term over 9 years. For a sale, you can use the lowest AFR of the three months ending with the month the contract is signed. Below it, Sections 1274 and 483 treat part of the principal as interest. The calculator checks your rate against the table.
How is the seller taxed on an owner-financed sale?
Usually on the installment method (Section 453): each principal dollar is part taxable gain and part tax-free return of basis, using the gross profit ratio, and the gain is taxed in the year the principal arrives. Interest is ordinary income each year. Depreciation recapture comes first. The schedule's tax column estimates this year by year.
What does the compare toggle show?
The same principal schedule paid by a structured installment sale: the buyer pays the full price at closing and an assignment company pays you the financed amount on the note's dates, at an illustrative payout rate. The gain, and the tax on the sale, lands in the same years. The difference is the interest rate and who you depend on: the buyer, or the assignment company. It has to be set up before closing.
Keep going
- Seller financing guide: how owner financing works, start to finish.
- How to structure seller financing: down payment, rate, term and balloon.
- Seller financing calculator: the seller's full tax picture and the structured comparison.
- Note value calculator: what a note buyer would pay for an existing note.
- What happens if the buyer defaults.