How to Calculate a Land Contract

Many home buyers opt to purchase homes via land contract, especially when their financial condition makes getting a traditional mortgage difficult or impossible. With terms subject only to the agreement of the seller and the buyer, a land contract offers more flexibility than a traditional mortgage and can be tailored to the unique circumstances surrounding the purchase. However, it's still important to understand the exact terms of the land contract and to calculate the costs involved in fulfilling its stipulations.

Step 1

Identify all of the up-front costs defined in the land contract (if any). Some typical up-front costs may be for items such as a deed or title search, a home inspection, a down payment or fees related to legal services.

Step 2

Add all of the up-front costs together to determine how much money will be needed at the closing of the sale per the land contract.

Step 3

Identify the monthly payment amount and the total number of payments to be made, according to the land contract's terms.

Step 4

Multiply the monthly payment amount by the number of payments to be made to determine the total of the payments you'll make over the life of the land contract.

Step 5

Add the up-front costs of the contract and the total monthly payments together to determine the total cost of the land contract. (Also include any balloon payment, if your land contract includes one.)

Tip

Be aware that terms such as who pays for title searches or other services are points to be negotiated and aren't automatically the responsibility of the purchaser.

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