Considering the current mortgage market, it’s no wonder that a Vendor Take Back Mortgage Clause is a growing solution for risk management. This is a creative way to take care of risks that are not possible to avoid. Essentially, the Vendor Take Back Mortgage Clause is not something that is easy to implement, but it can be a great way to reduce your risk.
It’s a creative solution
Using a vendor to take back your mortgage is an option worth considering if you are selling your house for more than cash in hand. Getting the loan out of your hair is a feat that will require a bit of negotiation and patience. The vendor will usually be able to pay off your mortgage in full in no time. In return you will be free to concentrate on your upcoming move. In fact, the vendor will be so generous that they may even allow you to keep a few extra keys. The vendor might also be willing to pay you a little for their time.
It’s a costly process
Generally, vendor take back mortgages are used when a seller wants to give an incentive to the buyer. The buyer pays the vendor a down payment in exchange for a loan. The seller then retains a percentage of the value of the home until the loan is paid in full.
Vendor take back mortgages can be a good option for buyers with credit challenges. The down payment is often lower than the down payment required by a conventional mortgage. However, the interest rate is higher than with a traditional mortgage. Generally, the interest rate is higher with vendor take back mortgages, because the seller is now a lender. The seller still has the option of using the sale proceeds to pay off the mortgage, but the rate is higher.
Vendor take back mortgages are also beneficial to sellers. A seller can use the proceeds to clear up mortgage debt or to cover closing costs. If the buyer defaults on the loan, the vendor can seize the home. In some cases, the seller will fall back on the buyer for the balance of the sales price. In other cases, the seller is the second lien on the property. This can be an advantage for the seller, as the buyer is likely to build equity in the property, which can help him or her when it comes time to sell.
The interest rate on a vendor take back mortgage can be higher than with a traditional mortgage, because of the second lien. However, the seller is often able to get a better rate for the vendor take back mortgage because he or she has a higher credit score than the buyer. Vendor take back mortgages are also an excellent choice for investors, because they can earn monthly income from the mortgage payments. If you are interested in a vendor take back mortgage, talk to your real estate agent about your options.
With the changing market, there is more pressure on buyers to make a down payment. It is difficult to save for a down payment, especially when compared to closing costs.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.