A vendor take back is the process where a seller of a home takes back a portion of the equity as a mortgage loan.
V.T.B.s usually come with an interest rate, and terms. They can be issued at any position on the title of a home. The seller retains equity in the home and continues to own a percentage equal to the amount of the loan until the vendor take-back mortgage is paid in full.
This applies if there is not enough of a down payment to get a traditional lender to perform a higher loan to value on the purchase. Typically a Mortgage Broker/Agent will perform a First Mortgage transaction with a lender and then request a V.T.B. from the current homeowner to close the deal.
Your down payment amount still matters as it shows the seller that you have “skin in the game”.
Your down payment will be provided to your closing lawyer to subtract from the amount needed when obtaining the V.T.B. to close. Furthermore, providing as much down payment as possible from your own resources lowers the term rate on your requested V.T.B.
When obtaining a V.T.B. always consult your Mortgage Broker/Agent and subsequently your closing lawyer. All details must be known and understood before performing a V.T.B.
