Posted by John Behle on March 30, 2000 at 24:06:00:
Seller financing is treated and calculated the same way as bank financing. It can be written differently, so there are cases I see as a mortgage buyer where the terms are pretty strange.
Interest can be calculated in different ways if lender and borrower agree, but in most cases it is just a straight amortization schedule.
As you pointed out, there is interest on the whole balance for the first month. The payment includes some amount of principal, so the next month there is less of a balance, less interest and more principal. This continues until the last month where there is a tiny amount of interest and the final amount of principal is paid.