Vendor Take Back Mortgage
What exactly is a Vendor Take-Back (VTB)?
This is when a seller offers to lend the buyer funds in order to help facilitate the purchase of the property. The VTB is a legally binding agreement that will represent a secondary lien on the property. The term, rate, payments and fees are all negotiated by the Seller and the Buyer (with help from their real estate agents and lawyers of course).
In other words, think of it as a second mortgage that is
being offered by the seller. However, in most cases, take-back
mortgages are offered at a rate below traditional market value and do not
typically include fees.
What are some of the benefits?
The most obvious benefit to the buyer, is that it helps to facilitate the purchase of a home with a much lower down payment option -- when traditional 'A' high ratio financing is not attainable.
However, there are also many benefits to the seller as well.
When in a buyers’ market, it can be attractive to offer a vendor take back in order to help sell the property quicker. As lending guidelines continue to tighten up, offering financing to assist in the purchase can often result in a faster sale with more eligible buyers.
There are also tax deferral advantages for capital gains if the property is labelled as an investment for the seller-- but I do suggest speaking with a certified accountant to learn more on this.
When a successful vendor take-back is negotiated up to 90% LTV, and placed behind a mortgage, your client can now:
-place as little as 10% down (owner occupied or rental)
-use a flexible stated income programs for BFS/Commission/Tips
-use 100% rental offset (subject or non-subject including room and board)
-have a 30 year amortization
-have flexible TDS calculations (no GDS)
-obtain financing that is not focused on beacon score
-use 100% gifted down payment from an immediate family member
-be as little as 1 day discharged from bankruptcy
-and much much more!
Even though Vendor Take-Backs are not for every client or situation, remember that it can be used as an option; Creative Financing is my Niche!
