Calculating seller finance payments

5 Replies

I am working on my first purchase will seller financing and having a little trouble calculating payments. I will be offering $200000 and like to pay around $800/month. How do I calculate the interest, which in turn gives me the amount owed when the balloon is due in 5-10 years?

It's easiest to use a calculator like this one...

but if you're [very] old-school, and really enjoy math, here's the formula --->

Have fun!

Search online for "mortgage calculator" "amortization schedule" "payment calulator"....any of those should do the trick. Excel also has all those same financial formulas, and the advantage is you can reference cells and pick multiple options to see what happens as you shift the variables around.

Based on the info you provided and assuming a fully amortizing 30 year loan you'd be paying about 2.7% on a 200K loan...sounds pretty low to me for a SF deal, but I guess it's possible. In 5 years you'd owe about 176K, 10 years 150K.

Thanks Nick. Those calculators give the monthly payment as a result to certain input criteria. I want to work backwards starting with the payment and the figuring out the interest.

Or maybe it's just a matter of saying my payments is X and Y dollars will be credited back?

Use Excel or a similar program.  There are four related functions, PMT (payment), PV (present value), FV (future value), RATE (rate, doh!) and NPER(number of periods, aka "term").  If you know any four of the values, you can use the appropriate function to compute the fifth.  The missing piece for your question is the amortization period, which is the time the mortgage would be paid in full.  I'll assume 30 years.

So, a payment of $800, PV=$300,000, FV=0 (fully amortized), and number of payments=360 I get a rate of 2.94%.

Knowing that, you can compute the balance at some point in the future using FV.  At five years I get $176K and $150K at 10 years.

Originally posted by @Jeremy Fields :

Thanks Nick. Those calculators give the monthly payment as a result to certain input criteria. I want to work backwards starting with the payment and the figuring out the interest.

Or maybe it's just a matter of saying my payments is X and Y dollars will be credited back?

 You just need to adjust the interest until you get it where the payment is approximately where you'd like.

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