Vendor Take-Back Mortgages

A vendor take-back mortgage is a unique situation. It can work in your favour; but it can also be very complicated.

If you consider this option, be sure to use a lawyer who is aware of the intricacies of a vendor take-back mortgage. You need to plan ahead for all sorts of situations: if the vendor dies, and their estate (including your mortgage) needs to be 'liquidated'; if the vendor becomes insolvent; if you want to make lump sum payments in addition to your regular payments; if you would like to renegotiate the mortgage (including penalties, if any). And these are just a sample of the items which should be specified in the mortgage agreement.

If you know the vendor remember that it can be difficult to deal with a friend or relative if something goes wrong. This can be a serious drawback to this kind of arrangement.

However, the pros for vendor take back mortgages are often worth the hassle. Sometimes vendors may take a lower interest rate than a bank. They may not require the same kind of credit check. They may also be more flexible regarding repayment terms.

It's important to weigh the pros and cons. Understand your own unique situation. Consult a real estate lawyer who has handle vendor take back mortgage transactions before. Be sure the constraints of the mortgage agreement will work in your favour - and are more advantageous than using another type of lender, such as a finance company mortgage.


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