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In the constantly evolving Ontario real estate market, buyers and sellers continue to come-up with creative ways to finalize their Agreements of Purchase and Sale. This blog aims to provide a “refresher” on the financial arrangement of a Vendor Take Back Mortgage (“VTB”).

A VTB is a financing arrangement whereby a property seller agrees to provide a loan/mortgage to a buyer to facilitate the purchase of their property. This loan supplements or replaces a portion of the buyer’s traditional mortgage, often allowing the buyer to acquire the property with less external financing.  The VTB is then registered as a mortgage against the property, and in the event that the buyer defaults, the mortgage is [usually] enforceable under the Mortgage Act.

In a real estate transaction involving a VTB, the terms of the loan are typically negotiated between the buyer and the seller and then included in the Agreement of Purchase and Sale. The terms outlined often include: the total loan amount, payment amount, interest rate, maturity date, repayment schedule, along with any other relevant conditions.

It is worth noting that VTB mortgages are commonly used as a financing tool when buyers face challenges obtaining traditional financing. They are also used in cases where buyers have obtained traditional financing, however, require an additional mortgage/loan to cover any shortfall not provided by their traditional financing provider. Moreover, sellers might also offer a VTB to attract buyers in hopes of closing a transaction quickly.

Although it would be safe to assume that most real estate transactions in Ontario do not include the registration of a VTB mortgage, there a plenty of circumstances where either a buyer or seller may find a VTB useful for their transaction. A VTB may offer flexibility in financing and can benefit both buyers and sellers under suitable circumstances.

If you have any legal questions regarding the registration of Vendor Take Back Mortgages, please do not hesitate to contact us at (905) 270-6660 or e-mail us at: Info@kormans.ca.

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Daniel Kuchuk is an Associate Lawyer at Kormans LLP. You can reach Daniel here: dkuchuk@kormans.ca.

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