Recently I had a file that involved a slightly more unusual style of financing. After exhausting all other options and not being able to find a practical fit, we attempted to find a private lender. Even with private lending, there can be some tricky restrictions and the loan-to-value (LTV) isn’t always favourable for the person looking for the financing.
We were stuck. We needed approx $55,000 to finish the deal, and an idea came to me like a shot – a moment of clarity: Vendor Take-Back Mortgage.
This specific property had unique characteristics and it needed someone who really loved it, really felt the value and potential of it, to feel comfortable to lend against it. Who better than the individual selling it?
In the end, the seller liked the idea so much, they decided to finance the whole portion of the mortgage the buyer was looking for!
For some brokers, this may be considered a “loss”. To me, it’s a massive win. It was a brilliant idea that everyone loved and the process is actually extremely easy. Through terms agreed upon in an amendment, the lawyers (either the buyer’s or the seller’s – this is dependent on preference of all parties involved) will prepare the actual mortgage documentation with the prescribed standard mortgage terms, at a rate negotiated between the parties and.. voila! Everyone is happy.
The sellers are getting what they want out of their place and are even netting a slightly higher profit thanks to the interest they will make on the monthly payments. The buyer’s have one simple mortgage to pay, and they didn’t have to go through the long and difficult paper process to get it.
Though, as a mortgage broker, there is no commission due, I still chalk this one up on the “win” board.
Let me know if you’re having a hard time with financing and you think this may be an option you’d like to consider. I’d be happy to explain the process and what I can do to help you facilitate this type of financing.
-RC
