1. What is Seller Financing Amortization?

Seller financing amortization is the process of gradually paying off a promissory note through regular payments that cover both principal and interest. This calculator helps create a schedule showing how each payment affects the loan balance.

2. How Does the Calculator Work?

The calculator uses the amortization formula:

Where:

• \( Previous\ Balance \) — The outstanding loan amount before payment
• \( Principal\ Portion \) — The portion of payment that reduces the principal

Explanation: Each payment reduces the principal balance, with the interest portion calculated based on the remaining balance.

3. Importance of Amortization Schedule

Details: An amortization schedule is crucial for both buyers and sellers in seller financing arrangements to track payment progress, understand how much principal remains, and plan finances accordingly.

4. Using the Calculator

Tips: Enter the previous balance and principal portion in USD. Both values must be positive numbers. The calculator will show the new remaining balance after the principal payment.

5. Frequently Asked Questions (FAQ)

Q1: What is seller financing?
A: Seller financing occurs when the property seller provides a loan to the buyer instead of traditional bank financing.

Q2: Why use an amortization schedule?
A: It provides transparency, showing exactly how each payment is applied to principal and interest over time.

Q3: How is the principal portion determined?
A: In a full amortization calculation, the principal portion increases with each payment while the interest portion decreases.

Q4: What's the difference between principal and interest?
A: Principal reduces the loan balance, while interest is the cost of borrowing and doesn't reduce the balance.

Q5: Can this be used for irregular payments?
A: This simple calculator handles single payments. For complete schedules, more complex calculations are needed.