Seller finance deal with balloon payment

[Alex Ng]

Hi, so I have someone in my network willing to sell their property to me. I do not have enough capital for a downpayment. My strategy is to conduct a sellers finance strategy where I incrementally pay them at 5% interest for 6 years (tentative) and then do a cash out refinance and pay them for the balloon payment. I am hoping to structure the deal where I can accumulate 25% equity during the seller's finance and be able to cash out refi 75% to pay the rest. The seller would have a lien position on this house. Does this help avoid the seller from making taxes?  Considering I'm doing a cash out refinance, im receiving money tax free and directly giving it to the seller. Does this mean the balloon payment they receive will not be taxed since it is debt? I'm hoping my strategy will work and incentivize the seller to do this deal as they will be paid interest and possibly tax free balloon payment? Can anyone give me insight on my strategy and explain how I should structure this?