In some real estate transactions, the buyer will ask the seller to hold a mortgage on the property. This is commonly referred to as a 'vendor takeback'. There are some questions that have to be answered to determine whether it is a good idea or not.
The seller has the following to consider.
- The amount of down payment the buyer is submitting. A minimum of 25% of the purchase price is generally recommended; however do not agree to anything until you have consulted with your lawyer.
- The credit rating of the buyer. The seller should obtain a credit report.
- The mortgage terms. This includes the interest rate, term and amortization period.
In some cases, a seller holding a mortgage can work in their favour. If they have no plans for the proceeds from the sale, they might get a better interest rate than investing in a term deposit or GIC. Holding a mortgage can be a good investment.
HomesByOwner of Durham Region recommends that all buyers and sellers consult with a real estate lawyer before entering into a written agreement.
Check out our Durham Region Real Estate website for private real estate sales.
HomesByOwner of Durham Region
Toll Free - 866.964.FSBO (3726)
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