How to use this calculator
- Enter the contract price and down payment.
- Enter the interest rate and amortization period.
- Enter the balloon year if the contract requires a payoff or refinance (common: 3–7 years).
- Add annual property tax and insurance if the buyer pays them monthly to the seller.
- Review the total monthly payment and the buyer's equity at the balloon.
Worked example
A $150,000.00 home sells on a land contract with $15,000.00 down at 8%, amortized over 20 years with a 5-year balloon. Principal and interest is $1,129.19, plus $250.00 for taxes and insurance, for a total of $1,379.19. At year 5 the buyer owes a balloon of $118,159.54 and has $31,840.46 of equity measured against the contract price.
These are the default inputs above, so you can follow along.
The formula
Principal and interest: M = P × r / (1 − (1 + r)−n), with P = price − down. Escrow = (annual tax + annual insurance) ÷ 12. Total monthly = M + escrow. Buyer equity at the balloon = contract price − remaining balance (this ignores appreciation and is measured against the contract price).
Frequently asked questions
What is the difference between a land contract and a mortgage?
With a mortgage or deed of trust, the buyer gets title at closing and the lender holds a lien. With a land contract, the seller keeps legal title until the contract is paid (or a set point), and the buyer holds "equitable title".
What happens if a land contract buyer misses payments?
It depends on state law and the contract. Some states allow forfeiture, where the buyer can lose the property and payments made. Others require foreclosure-like procedures. This is a major risk for buyers.
Should a land contract be recorded?
Recording the contract or a memorandum of it in the county records is widely recommended to protect the buyer against later liens or sales by the seller.
Who pays property taxes on a land contract?
Usually the buyer, either directly or through escrow paid to the seller. The contract should say who pays and how.
Is a contract for deed the same as a land contract?
Yes, they are generally the same structure under different regional names, along with "installment land contract" and "agreement for deed".
Related calculators
Related guides
- How Seller Financing Works: A Step-by-Step Guide
- Seller Financing Pros and Cons for Buyers and Sellers