Calculating seller finance payments

[Jeremy Fields]

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?

[Jon Holdman]

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.