Vendor Take Back Mortgage.
Firstly, a vendor take back mortgage is an example of a helpful solution for a purchaser and vendor.
Simply put, the vendor (seller) will hold back a mortgage on the property they’re selling to you.
From a purchasers standpoint, a vendor take back mortgage usually comes down to having an insufficient down-payment. For example, your mortgage lender may have approved your mortgage to 65% of the purchase price. Your 20% down payment will fall short. However, should the vendor be willing to take back, or lend you, the 15% difference, the transaction will work.
The vendor doesn’t typically provide a vendor take back mortgage out of the kindness of their heart. There is often a motivating factor behind their decision to loan a purchaser money.
In most cases, the vendor is wanting to dispose of the property without delays and is prepared to receive the majority of the sale proceeds in hand today. Furthermore, the vendor will typically charge a rate of interest to the purchaser, which is an additional perk to the vendor. Moreover, the fact that a vendor is prepared to offer a take back mortgage may entice potential purchasers to express interest.
For the purchaser, a take back mortgage will enable them to acquire property. In addition, there are cases when vendors provide extremely large vendor take-back mortgages. An example of this would be where a potential purchaser cannot obtain bank financing due to income or credit issues. Regardless, the vendor may have faith in the purchasers ability to make their payments despite income and credit not meeting bank standards. A potential purchaser may qualify for private financing, but may be disheartened by the interest rate. Should the vendor be willing to provide a take back at a rate slightly higher than the banks, but below private cost, it could result in a mutually beneficial outcome.
Contact us anytime for additional information, in addition, how we can possibly help you arrange financing that allows a vendor take back mortgage.