| A VTB or Vendor Take Back, is simply where the | | | | as well). |
| seller (Vendor) of a property is willing to provide some | | | | As there are many benefits to both parties, it never |
| or all of the mortgage financing on that property. A | | | | hurts to ask if a vendor is willing to hold a mortgage on |
| VTB is generally a lot more common on commercial | | | | the property. Even if it's only a smaller 2nd mortgage |
| properties than it is on residential, however, residential | | | | that just allows you to not put in an extra $5000 or |
| VTB's do exist. In fact, we have had VTB's on 3 of | | | | $10000. As long as you aren't over-extending yourself |
| the 11 properties we have purchased. In one case, the | | | | too far, then using other people's money is a great |
| seller gave my business partner and I an 80% loan to | | | | way to use leverage and enable you to buy other |
| value mortgage at a 5.5% interest rate with a 3-year | | | | properties. Or, to have money left over to renovate, |
| term! Not bad considering we didn't even have to go | | | | refurbish, or spend on marketing to rent your new |
| to the bank! VTB's usually are held because of one or | | | | purchase. |
| any of the following reasons: | | | | For you, as the purchaser, there are other potential |
| - it's a distressed property, and to make it more | | | | benefits from obtaining a VTB: |
| desirable the vendor offers a VTB to the potential | | | | - generally no pre-payment penalty if you payoff the |
| purchaser; | | | | mortgage early as with bank financing; |
| - the purchaser is unable to obtain standard financing | | | | - vendor's rarely ask for all the documentation (T4's, |
| from the bank; | | | | Pay stub, Employee letter, etc.) that bank's require; and |
| - the seller knows (and trusts) the purchaser and is | | | | - the mortgage, and it's value, will not show up on your |
| willing to help them out on this purchase; | | | | credit score as is now becoming more common with |
| - the purchaser can obtain some financing from the | | | | the big banks and credit unions. |
| bank, but doesn't have the capital to close - so the | | | | Keep in mind, however, that a VTB is not always a |
| seller will hold a smaller 2nd mortgage on the property; | | | | great plan. Ensure your real estate lawyer thoroughly |
| and | | | | reviews all of your VTB documentation including the |
| - the vendor may make considerably more money on | | | | Purchase and Sale Agreement and the mortgage and |
| the property by charging a higher than market value | | | | it's conditions. Also, make sure you speak with the |
| interest rate and collecting it back over time | | | | vendor to determine if the term can be extended |
| (sometimes there may be tax benefits for the vendor | | | | when it comes due. |