{
  "slug": "seller-financing-note-yield",
  "title": "Seller Financing Note Yield Calculator",
  "heading": "Seller Financing Note Yield Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/seller-financing-note-yield",
  "summary": "Calculate the effective yield a seller earns carrying a note, including any discount.",
  "description": "When a seller carries financing instead of taking all cash, they're effectively buying a bond secured by real estate, and the yield on that note depends on the interest rate, the amortization structure, whether there's a balloon payment, and — if the seller later sells the note at a discount to a note buyer — the price concession they take. This calculator computes the note's stated yield from its rate and term, then separately models the effective yield if the note is sold before maturity at a discount, which is common when sellers need liquidity sooner than the note's term provides. A seller carrying a $200,000 note at 7% for 10 years with a 5-year balloon earns a straightforward 7% if held to the balloon, but if they sell that note at year 3 for 90 cents on the remaining balance, their effective realized yield over the holding period is meaningfully different from the note's face rate — usually higher for the buyer, and it caps the seller's return below face rate if sold early.",
  "formula": "Monthly payment = amortizing payment formula on face amount, rate, and amortization term; Effective yield if sold at discount = solves IRR on (payments received + discounted sale proceeds) vs. face amount financed.",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=seller-financing-note-yield",
  "inputs": [
    {
      "id": "noteAmount",
      "label": "Note face amount",
      "kind": "number",
      "hint": null,
      "default": 200000,
      "unit": "$",
      "min": 1,
      "max": null
    },
    {
      "id": "noteRate",
      "label": "Note interest rate",
      "kind": "number",
      "hint": null,
      "default": 7,
      "unit": "%",
      "min": 0,
      "max": 15
    },
    {
      "id": "amortYears",
      "label": "Amortization period",
      "kind": "number",
      "hint": null,
      "default": 20,
      "unit": "years",
      "min": 1,
      "max": 40
    },
    {
      "id": "holdMonths",
      "label": "Months seller holds note before selling (0 = holds to term)",
      "kind": "number",
      "hint": null,
      "default": 0,
      "unit": null,
      "min": 0,
      "max": 480
    },
    {
      "id": "salePriceDiscount",
      "label": "Discount if sold early (% off remaining balance)",
      "kind": "number",
      "hint": null,
      "default": 10,
      "unit": "%",
      "min": 0,
      "max": 50
    }
  ],
  "outputs": [
    {
      "id": "effectiveYield",
      "label": "Effective annualized yield",
      "format": "percent",
      "hint": null,
      "primary": true
    },
    {
      "id": "payment",
      "label": "Monthly payment received",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "saleProceeds",
      "label": "Proceeds if note sold early",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "remainingBalance",
      "label": "Remaining balance at sale/end",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "Note face amount: 200000 $",
      "Note interest rate: 7 %",
      "Amortization period: 20 years",
      "Months seller holds note before selling (0 = holds to term): 0",
      "Discount if sold early (% off remaining balance): 10 %"
    ],
    "outputs": [
      "Effective annualized yield: 3.15%",
      "Monthly payment received: $1,551",
      "Proceeds if note sold early: $0",
      "Remaining balance at sale/end: $0"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter note face amount ($).",
      "Enter note interest rate (%).",
      "Enter amortization period (years).",
      "Enter months seller holds note before selling (0 = holds to term).",
      "Enter discount if sold early (% off remaining balance) (%).",
      "Read your effective annualized yield on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "noteAmount": 120000,
        "noteRate": 4.2,
        "amortYears": 12,
        "holdMonths": 0,
        "salePriceDiscount": 6
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "noteAmount": 200000,
        "noteRate": 7,
        "amortYears": 20,
        "holdMonths": 0,
        "salePriceDiscount": 10
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "noteAmount": 320000,
        "noteRate": 11.200000000000001,
        "amortYears": 32,
        "holdMonths": 0,
        "salePriceDiscount": 16
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "Why would a seller discount their own note to sell it?",
      "a": "Note buyers price in the risk of default, the time value of money, and their own required return, typically 10-25% depending on borrower credit, equity position, and note seasoning. A seller who needs a lump sum sooner than the amortization schedule provides trades future yield for present liquidity."
    },
    {
      "q": "Does seasoning affect the discount rate?",
      "a": "Yes significantly — an unseasoned note (recently created, no payment history) sells at a steeper discount than one with 12-24 months of on-time payments, since payment history is the best predictor of continued performance for note buyers."
    },
    {
      "q": "Is seller financing yield taxed differently than rental income?",
      "a": "The interest portion of each payment is taxed as ordinary interest income, while any principal above the seller's basis in the property is generally reported under installment sale rules, spreading capital gains recognition across the payments received rather than all at closing."
    },
    {
      "q": "What's a typical seller-financed note rate right now?",
      "a": "Seller-financed notes on investment property commonly run 1-3 points above prevailing conventional mortgage rates to compensate the seller for the risk and illiquidity versus a bank, though very motivated sellers on hard-to-finance properties sometimes carry below-market rates to move the deal."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/subject-to-deal-math",
    "https://www.revenuelab.fyi/toolbox/hard-money-bridge-cost",
    "https://www.revenuelab.fyi/toolbox/1031-exchange-boot-basis"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Seller Financing Note Yield Calculator (https://www.revenuelab.fyi/toolbox/seller-financing-note-yield)"
}