Vendor Take Back Mortgages in Ontario

[Jay Shaw]

My partner and I came across a great property the other day however, we're tapped out capital wise. We thought Vendor Take Back might be a good way to be able to move forward on the property, however, we were told that back in 2008 in the province of Ontario, the mortgage rules tightened on this and VTB can only be used for commercial properties and not Single Family Homes.

Any truth to this? Anyone doing this in Ontario?

My partner and I have good credit but lack the down payment which is 20% which is a large chunk of change. Other than JV - any other creative options people might want to suggest we continue? We're eager to work with the seller as he has 4 other properties and is looking to get out of the rental business which could be quite beneficial to us, and to him, after all, positioning VTB is really about helping solve a problem.

Any advice would be appreciated.

[Doug Pretorius]

@Matt Geerts I do zero-down deals, but I don't use VTBs. I purchase by instalment sale to take over the existing mortgage from a seller who doesn't have enough equity to sell conventionally.

As an example, I came across a FSBO in London who had owned his 3/2 townhouse for only 2 months. He bought it with his girlfriend but before moving in they broke up and he lost his job. Now he sat there with a property that he owed 98.6% (put 5% down, but had 3.6% mortgage insurance tagged on). So he couldn't sell it on the MLS without coming out of pocket for the commission unless by some miracle his agent managed to sell it for 5% more than it was worth.

Come to think of it...you might actually be able to sell a house in Toronto for 5% more than you paid 2 months ago :D

Anyway, I bought it on an instalment sale for the mortgage balance at the time of closing (4 years and 10 months away) and paid his PITI directly to the payees. He was ecstatic to say the least! As was I.

Are they hard to find? I guess it depends on your perspective. Here in KWC I find that they make up 1-2% of the market so right now that's about 22 owners that are trying desperately to get more than the house is worth on the MLS. That's far more than I can buy, but requires a lot of digging through ~1500 homes. I've also never been able to buy this way through a realtor, so I have to wait for the listing to expire.

Lots of patience and perseverance.