What is a purchase money mortgage classified as for the seller?

A purchase money mortgage is classified as a credit for the seller because it represents money that they will receive from the buyer to help finance the purchase of the property. In this context, when a seller accepts a purchase money mortgage, they effectively extend credit to the buyer for part of the purchase price. This means the seller is looking at the amount of the mortgage as an amount owed to them, which is a receivable.

In accounting terms, credits increase income and receivables. Thus, the seller considers the mortgage as a credit in their transaction records. This credit is recognized because it reflects a future cash inflow that the seller anticipates receiving when the buyer pays off the mortgage over time.

On the other hand, a debit would typically represent an expense or an increase in assets for the seller, while an asset reflects owned items or rights and a liability signifies obligations or debts of the seller. In the case of a purchase money mortgage, classifying it as a credit accurately captures the financial relationship and future expectation of payment between the seller and the buyer.