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A vendor take-back (VTB) mortgage is seller financing where the seller of a property acts as the lender, letting the buyer pay part of the purchase price over time instead of receiving it all in cash at closing.
A VTB can help close a sale when a buyer can't secure the full amount from a conventional lender, or when a seller wants to make a property more attractive to buyers — common in commercial deals, rural or agricultural property sales, and business succession transactions. The seller registers a mortgage charge for the outstanding amount and is repaid, with interest, on agreed terms.
When a buyer also arranges a conventional first mortgage, the VTB is usually registered as a second mortgage behind it. Primary lenders often review or restrict VTB arrangements because they affect how much real down payment the buyer is actually contributing, which in turn affects the buyer's true loan-to-value position.
Position on title varies: a VTB can be registered in first position, but where a conventional first mortgage also exists it is usually subordinate, similar to a second mortgage.
Primary lenders scrutinize VTB terms: because seller financing affects the buyer's real down payment and loan-to-value ratio, first-mortgage lenders often require disclosure or place conditions on VTB arrangements.
More common outside typical resale: VTBs appear more often in commercial real estate, rural and agricultural property sales, and family or business succession transfers than in standard residential resale.
Terms are privately negotiated: rate, amortization, and repayment terms are set directly between buyer and seller rather than by a regulated lender.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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