What is a Vendor-Take-Back (VTB) Mortgage?
I’d like to introduce the concept of a Vendor-Take-Back (VTB) mortgage, also known as Seller Financing.
A VTB is a type of mortgage in which the Seller offers to lend funds to the Buyer to help facilitate the purchase of the property.
Essentially, the Seller becomes a type of private lender in the deal, where the Buyer and Seller negotiate the terms of the loan (i.e. interest rate, repayment terms, etc.). The amount borrowed by the Buyer can vary: it could cover the closing costs, be part of the down-payment, or even be used to finance a majority of the property.
A VTB can occur at the same time as a traditional mortgage, meaning that the Buyer can still get a mortgage from a credit institution, while also having a VTB mortgage in 2nd position.
Last year, I negotiated a 2nd position VTB mortgage on a multi-family property that I purchased. Due to the current low interest rate environment, as well as some value-add work and rent increases, I was able to force appreciation and refinance at a much lower rate, and payout the VTB mortgage within a year.
This was the Seller’s first experience as a private lender, and they were so happy with the experience that they are more than willing to do it again to earn some passive income!
Overall, this creative financing strategy provides benefits to both the Seller and the Buyer.
Want to learn more about the advantages of VTBs? Then reach out to me and I’d be happy to set-up a time to chat to explain in more detail.
Until next time, wishing you and your loved ones many exciting summer adventures ahead!