How do you calculate a mortgage balance on a seller finance deal?

[Olesya Richards]

Hi, 

I have a friend who purchased a house on seller finance terms. The original purchase price is $165503.44, 10% APR, $700 monthly payment. She started paying on 09/14/2017. Now she wants to get out of that contract by selling the house to me. But she doesn't know her remaining balance. The guy who sold her the house is in his 90s and is hard to get in touch with. So we're trying to figure out the remaining balance without involving the family. Any calculators we could use? Any advice is greatly appreciated!

[Bill B.]

If the interest rate and the payment are correct, she owes way more than the purchase price. She had $1450 in interest plus insurance plus property taxes per month. So even if she’s paying the property taxes and insurance separately, she owes $750 PER MONTH the loan has been in existence, MORE than she paid. So $9,000 per year on top of her purchase price should be the balance. 

I don’t know why anyone would sign such a deal as the buyer. I mean it’s easy to figure out. 10% of $165,500 is $16,550 per year in interest. And her payment is only $700 x 12 or $8400. Unfortunately, since she’s underpaying the interest, the interest per year is actually climbing 10% of that $9000 or an extra $900 after 1 year. 

If the loan is 3 years old she owes the original balance plus $9,000, plus $10,000, plus $11,000. Or $30k more than the original balance, about $195k. If she’s in no position to declare bankruptcy she better get our of this before she owes waaaay more than it’s worth.