If you are selling a home in Guelph or elsewhere in Ontario, you may start hearing more about Vendor Take Back mortgages (VTBs). In fact, we have seen more VTB proposals in the past month than in the previous five years combined. With higher interest rates and tighter lending rules in 2025, buyers and investors are increasingly turning to this creative financing option.
But is a Vendor Take Back mortgage a smart move for you as a seller—or a risk you should avoid? Let’s break it down.
What is a Vendor Take Back (VTB) Mortgage?
A Vendor Take Back mortgage (also called a “seller take-back mortgage”) is when the seller acts as the lender instead of a bank or credit union. The buyer pays the seller regular mortgage payments, usually interest-only, for a set period, and then repays the remaining balance (called a balloon payment) at the end of the term.
- Buyers benefit because they may not qualify for a traditional mortgage.
- Sellers benefit by earning interest and potentially selling their property at full asking price.
VTB mortgages are considered a type of private lending, and usually come with higher interest rates than traditional mortgages.
Is a VTB Mortgage a Good Idea in 2025?
A Vendor Take Back mortgage isn’t right for every deal. However, in today’s market, where many buyers struggle with bank financing, it can be a win-win strategy.
- For buyers, a VTB can provide access to financing when other options aren’t available.
- For sellers, it can mean steady monthly income, a higher selling price, and the chance to close a deal that might otherwise fall through.
Buyers: Pros and Cons of a Vendor Take Back Mortgage
✅ Pros for Buyers
- Lower upfront down payment
Traditional lenders require at least 20% down for investors. In Guelph, with an average home price of around $750,000, that’s $150,000. With a VTB, a seller may agree to 5–10% down, making it easier to get into the market. - Flexible terms
Buyers and sellers negotiate directly, often avoiding strict bank rules like high down payments, income verification, or credit checks. - Faster approvals
Since terms are set privately, a VTB can close more quickly than waiting on a bank’s underwriting process.
❌ Cons for Buyers
- Higher interest rates
Because the seller is acting as a private lender, the rate is usually 2–4% higher than what a traditional lender would charge. - Interest-only payments
Most VTBs require buyers to make monthly interest-only payments, without reducing the principal. That means a large lump-sum payment is due at the end of the term. - Paying closer to asking price
To convince a seller to carry the mortgage, buyers may need to offer full asking price, or more flexibility on terms.
Sellers: Pros and Cons of a Vendor Take Back Mortgage
✅ Pros for Sellers
- Stronger negotiating power
By offering financing, sellers can often hold firm on their asking price. - Steady income stream
Instead of receiving one lump sum, sellers collect monthly interest payments, which can supplement cash flow. - Attracting more buyers
In a high-rate environment, offering a VTB can make your listing stand out and attract investors who can’t get bank approval.
❌ Cons for Sellers
- Delayed full payment
You won’t receive the entire sale price upfront. Instead, you’ll get the down payment first, and the balance at the end of the term. - Financial risk
If the buyer defaults, the seller could face delays or legal costs in reclaiming the property. That’s why it’s crucial to have a lawyer draft and review the contract.
Real-World Example of a VTB in Guelph
Let’s say you’re selling a property for $500,000.
- The buyer offers a 10% down payment ($50,000).
- The seller carries a $450,000 VTB mortgage at 8% interest only for 24 months.
- Monthly payments to the seller = $3,000 in interest income.
- At the end of the term, the buyer must pay the seller the remaining $450,000 balance.
For the seller, this means:
- Immediate $50,000 cash.
- $72,000 in total interest collected over 2 years.
- The remaining $450,000 paid at the end of the term.
This can be attractive if the seller doesn’t need the full sale proceeds right away and wants income flow plus higher overall returns.
When Does a VTB Make Sense in 2025?
- In a buyer’s market: With higher borrowing costs and more homes for sale, sellers can use VTBs to stand out.
- If the seller doesn’t need full funds immediately: Retirees or investors downsizing may prefer steady monthly income instead of one lump sum.
- When buyers struggle with traditional lenders: A VTB can save deals that might otherwise collapse due to financing.
Key Takeaways
- A Vendor Take Back mortgage is a creative financing tool becoming more common in Ontario’s high-rate market.
- Buyers gain flexibility and access to financing, while sellers gain steady income and stronger negotiating power.
- Both sides must carefully review terms with a real estate lawyer before committing.
In 2025 and beyond, as affordability challenges continue in Guelph and across Ontario, VTBs are no longer rare, they’re becoming a valuable strategy in closing real estate deals.
About us
Beth and Ryan Waller are Guelph real estate agents. They can help you through the ins and outs of vendor take back mortgages. They can also explain other creative options that we’re seeing in todays market.