When seller financing is involved, the buyer makes payments to the seller, instead of getting a loan from and making payments to a bank.

The seller is giving a loan to the buyer, with the property as the collateral or security of the loan. This does NOT mean the seller is giving money to the buyer but it does mean that the buyer owes the seller money over time. 

The seller and buyer come up with the terms of the loan (amount of the loan, downpayment (cash to seller at closing), length of the loan, etc.) and a legally binding contract is drawn up and agreed to.

• Sellers can often get "their number" for the property, even if this means the buyer is overpaying for the property (if it's not selling at the price you want, the market is telling you it's not worth that amount).

• Ability to sell the property faster and cheaper. Traditional banks charge a lot of fees (which can lead to a lower purchase price), require a lot of documentation and take a long time to close.

• Certainty of Close. Without traditional lenders involved, there's very little chance of the deal falling through (pointing you back to square one). You're in control.

• Often by receiving money over time instead of one lump sum, the seller can legally reduce their tax obligation. This means the seller actually gets to keep much more of the money they receive.

A balloon payment is a final, one-time payment that is due before the end of a loan term. 

Key Features of a Balloon Payment:

1. Large Final Payment: The remaining balance of the loan (the "balloon payment") becomes due in a lump sum at the end of the agreed period.

2. Ends a Loan Early: Loans with a balloon payment means the loan is paid in full quicker than it would take if the borrow just made normal payments.

Example of a Balloon Payment:

• Loan Amount: $300,000

• Loan Term: 30 years

• Balloon Term: 15 years

• Monthly Payments: Calculated as if the loan were a 30-year mortgage, keeping payments smaller.

• Balloon Payment Due: At the end of the 15-year balloon term, the remaining loan balance must be paid in full 

In the above example $150,000 will have been paid over the first 15 years from monthly payments, then the remaining $150,000 is due in full. The lender gets repaid in full in only 15 years even though the loan term was for 30 years.

Purchasing a property Subject-To the existing financing means that while the debt stays in the seller's name, the buyer takes over responsibility of making the payment on the existing mortgage(s). Note this is not the same as assuming the exiting mortgage, which requires the lender to underwrite and approve the buyer. Purchasing Subject-To does not require the lender's approval or involvement.

• The buyer and seller agree on terms and sign a purchase agreement.

• The buyer takes title to the property "subject to" the existing mortgage.

• The buyer makes payments directly to the lender or through a third-party servicing company.

• Since the seller doesn't get the money owed on their mortgage anyway (it goes to the bank), a subject-to componet might allow for a higher purchase price and more cash in the seller's pocket

• The seller may want to avoid foreclosure or financial strain.

• It allows the seller to sell a property quickly, especially if the market is slow

• It allows the seller to sell a property with limited equity without having to pay cash out of pocket to sell the property