A Vendor Take Back (VTB) Mortgage is a type of home financing arrangement in which the seller of a property provides financing to the buyer, rather than (or in addition to) the buyer getting a mortgage from a traditional lender like a bank.

Here's how it works:

• The seller acts as the lender, effectively "taking back" a mortgage from the buyer as part of the sale.

• The buyer makes regular mortgage payments (with interest) to the seller, based on agreed-upon terms.

• The VTB may cover the entire purchase price or be a secondary loan that complements a traditional mortgage.

Why would this happen?

Buyer's perspective:

• Easier qualification if the buyer can't get full financing from a bank.

• Potentially more flexible terms or lower interest rates.

Seller's perspective:

• Attract more buyers, especially in slow markets.

• Earn interest on the loan — potentially a better return than other investments.

• Defer some capital gains tax if structured correctly (in some jurisdictions).

Example:

• A house sells for $500,000.

• The buyer has $100,000 down payment and qualifies for a $350,000 bank mortgage.

• The seller agrees to finance the remaining $50,000 as a VTB mortgage, with a term of 5 years at 5% interest.

• The buyer pays the seller monthly on that $50,000 while also paying the bank.

Risks:

• For the seller: Risk of default by the buyer. Seller may have to foreclose.

• For the buyer: May have stricter repayment terms or balloon payments if not carefully structured.