Vendor Take Back Mortgage.
Vendor take back mortgage, what’s that?
Vendor take back financing can be very beneficial to both buyer and seller.
Your vendor (seller) will hold back a mortgage on the property that you are purchasing.
You might consider a vendor take back mortgage if you have an insufficient down payment or wish to keep cash on hand. It is possible that your mortgage lender might have approved you for a certain loan amount that combined with your down payment is insufficient. This is where the vendor will provide you with a vendor take back mortgage.
Property Location: Toronto, Ontario
Purchase Price: $800,000
Approved 1st Mortgage: $520,000 @ 5%
Down Payment: $200,000
Vendor Take Back Mortgage: $80,000 @ 5%
Outcome For Purchaser: Obtained a property that they would’ve otherwise been able to purchase.
Outcome for Seller: Receives gross proceeds of $720K and will earn $4,000 per annum in interest.
You might be wondering why someone would provide a vendor take back mortgage. In some cases, the vendor offers the vendor take back mortgage as an incentive to attract purchasers in a soft market or when the property isn’t receiving much interest. It could also be that the property type and location might not be eligible for financing up to a certain degree that a typical purchaser client can afford.
In most cases, the vendor will charge an interest rate on the vendor back mortgage. This now becomes a potential revenue source for real estate investors while also receiving the majority of the sale proceeds to save or reinvest.
Feel free to contact us anytime to learn more about the pros and cons about a vendor take back mortgage and how you might be able to benefit.
DV Capital Corporation
FSRA Brokerage License:. 13186