A purchase-money mortgage is a mortgage issued to the borrower by the seller of a home as part of the purchase transaction. It is also known as Seller financing. It functions the same as a mortgage obtained through any lending institution. This type of mortgage is also used in situations where the buyer is assuming the seller’s mortgage and the difference between the balance on the assumed mortgage and the sales price. As a result of this non-traditional loan, these types of mortgages typically have higher payments as well as interest rates.