Advantages of a Vendor Take-Back Mortgage - Video Blog

Monday Sep 23rd, 2019

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What is a Vendor Take-Back Mortgage?

The vendor take-back mortgage allows the seller of the home to lend money to the buyer. The property has to be owned outright by the seller, or have enough equity in the property for the loan to take place.

The buyer is still required to make regular payments to the seller as they would with any other lender. The interest rate is set by the seller and agreed to by the buyer. It is generally at a higher interest rate than one would receive with a more traditional mortgage.

 

Why Consider a Vendor Take-Back Mortgage?

This is a tool used in specific situations where there are either market challenges for the seller or credit challenges for the buyer.

One of the most common scenarios… is during a buyer’s market. High inventory means lots of competition, putting a seller at a disadvantage. To entice buyers to consider their property over the hundreds of other options available, a seller can offer to provide funding to a buyer who may not otherwise have access to the funds required to make an offer.

 

Benefits of the Vendor Take-Back Mortgage

The vendor take-back mortgage offers 3 benefits to the seller:

  1. You can sell your home faster.
  2. You are able to generate extra income from the interest.
  3. You’ll reduce the amount of taxes on capital gains.

For the buyer, the vendor take-back mortgage will provide an additional type of financing option when facing down payment, or credit challenges.

Although taking advantage of the vendor take-back mortgage may not be for everyone, it does offer a lesser-known option for arranged financing.

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