Seller Financing Calculator
Calculate seller financing payments, total interest earned, and cash flow for both buyer and seller. Model custom terms with optional balloon payment.
Owner Carry-Back Calculator
Calculate owner carry-back second lien amortization, monthly income, and subordination risk. Compare carry-back terms to traditional sale proceeds.
$
$
$
%
Carry-Back Amount⧉
$40,000.00
10.00% of sale price
Monthly Income⧉
$811.06
For 5 years
Total Interest Earned⧉
$8,663.35
Total interest over loan life
CLTV⧉
90.00%
Risk: Moderate
Cash at Closing⧉
$360,000.00
Sale price minus carry-back
First Mortgage LTV⧉
80.00%
Risk Assessment: Moderate
CLTV of 90.00% means the buyer has 10.00% equity. This provides a reasonable equity cushion for your second lien.
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $6,778.00 | $2,955.00 | $33,222.00 |
| 2 | $7,340.00 | $2,393.00 | $25,882.00 |
| 3 | $7,949.00 | $1,783.00 | $17,933.00 |
| 4 | $8,609.00 | $1,124.00 | $9,324.00 |
| 5 | $9,324.00 | $409.00 | $0.00 |
Planning notes, formulas, and examples
About the Owner Carry-Back Calculator
An owner carry-back is a form of seller financing where the seller provides a second mortgage (subordinate to the buyer's primary bank loan) to bridge the gap between the buyer's down payment plus first mortgage and the sale price. For example, if the buyer has a 10% down payment and an 80% first mortgage, the seller can carry back the remaining 10% as a second lien.
Carry-back notes help close deals when buyers are short on down payment or when the property doesn't qualify for full bank financing. The seller receives monthly payments with interest on the carry-back amount, creating an ongoing income stream. However, the second lien position carries higher risk — in a foreclosure, the first mortgage gets paid first.
This calculator models the carry-back note amortization, shows monthly income and total interest earned, and estimates the risk exposure based on the combined loan-to-value (CLTV) ratio.
Homebuyers, investors, and real-estate professionals all benefit from precise owner carry-back figures when evaluating properties, negotiating deals, or planning long-term investment strategies. Save this calculator and revisit it whenever market conditions or your financial situation changes.
When This Page Helps
Carry-backs can make deals work but carry real risk. This calculator shows exactly what you'll earn monthly, how much interest over the life of the note, and your risk exposure based on CLTV — helping you decide if the terms are acceptable.
How to Use the Inputs
- Enter the sale price and the first mortgage amount.
- Input the buyer's down payment.
- The carry-back amount auto-calculates as the gap.
- Set the carry-back interest rate and term.
- Review monthly income, total interest, and CLTV risk assessment.
Formula used
Carry-Back Amount = Sale Price − First Mortgage − Down Payment
Monthly Payment = P × [r(1+r)^n] / [(1+r)^n − 1]
CLTV = (First Mortgage + Carry-Back) / Sale Price × 100
Total Interest = (Monthly × Months) − Carry-Back PrincipalExample Calculation
Result: $810.68/month on $40,000 carry-back, CLTV 90%
Sale price $400,000, buyer puts 10% ($40,000) down, bank lends 80% ($320,000). Seller carries back the remaining $40,000 at 8% for 5 years. Monthly payment: $810.68. Total interest: $8,641. CLTV: 90% (moderate risk).
Tips & Best Practices
- Keep CLTV below 90% to maintain a reasonable equity cushion protecting your second lien.
- Shorter terms (3–5 years) reduce risk — the buyer must refinance or pay off your note sooner.
- Charge 1–3% above the first mortgage rate to compensate for subordinate position risk.
- Include a late payment penalty and default provisions in the promissory note.
- Verify the first mortgage lender allows a second lien — some loan programs prohibit it.
- Consider requiring the buyer to maintain hazard insurance with you as a loss payee.
How an Owner Carry-Back Works
In a typical carry-back scenario, the buyer obtains a first mortgage from a bank (70–80% LTV), provides a down payment (5 –20%), and the seller finances the remaining gap as a second mortgage. The carry-back is documented with a promissory note and recorded deed of trust/mortgage. The buyer makes two payments monthly: one to the bank and one to the seller.
CLTV and Risk Assessment
Combined Loan-to-Value (CLTV) is the total of all liens divided by the property value. A CLTV of 80% means there's 20% equity protecting lien holders. For second liens: below 85% CLTV is lower risk, 85–90% is moderate, and above 90% is higher risk. Higher CLTV means you're more likely to lose money if the buyer defaults and the property has declined in value.
Tax Implications of Carry-Back Notes
Carry-back notes create installment sales under IRS Section 453. Interest income is taxed as ordinary income. The principal portion of each payment is split between return of basis and capital gain. This can be advantageous for spreading tax liability over the note term rather than recognizing all gain in the sale year.
Sources & Methodology
Last updated:
Frequently Asked Questions
An owner carry-back is a second mortgage provided by the seller to the buyer. It bridges the gap between the buyer's down payment plus first mortgage and the sale price. The seller receives monthly payments with interest and holds a subordinate lien on the property as security.
In a foreclosure, the first mortgage holder is paid first from the sale proceeds. Second lien holders receive whatever remains, which may be little or nothing. Higher CLTV ratios increase this risk because there's less equity cushion. Below 90% CLTV is considered moderate risk; above 95% is high risk.
Carry-back rates are typically 1–3% above the first mortgage rate. If the buyer's bank rate is 7%, the carry-back might be 8–10%. Higher rates compensate for the subordinate position and illiquidity. Check state usury laws for maximum allowable rates.
Most carry-back notes have 3–7 year terms, though they may amortize on a 15–30 year schedule with a balloon payment. Short terms protect the seller by requiring the buyer to refinance or pay off the note relatively quickly.
Yes, but at a steep discount. Note investors typically pay 50–75% of the remaining balance for second-position notes. Factors affecting price include CLTV, payment history, interest rate, remaining term, and property condition. Seasoned notes with 12+ months of payments sell for more.
You can foreclose, but as a junior lien holder, you must either cure the first mortgage default (if any) or risk losing your position in a first-mortgage foreclosure. The foreclosure process varies by state. Many carry-back holders negotiate workout agreements (loan modification, forbearance) before foreclosing.
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