I have clients who bought a building a while ago to use as an office. They have been in business for a long time, but commercial lending is much stricter than personal lending. Fortunately, the seller had no mortgage, and was content to give my clients a mortgage back instead of taking cash on closing.
A vendor take-back mortgage is similar to a conventional mortgage. The seller has to not need the cash right away, and be content to get monthly payments toward the loan for a year or more. It is registered just like a conventional mortgage, with a set interest rate (determined by the vendor), payment frequency and amounts.
Ultimately, a VTB is useful when the buyer and seller know each other, the buyer wants to buy but can’t qualify for a mortgage (or a mortgage that he or she wants), and the seller doesn’t need the money right away. If you fit into that box, a VTB can be a great way to get the deal closed.
