Vendor Take-Back Mortgage (VTB)

A vendor take-back mortgage (VTB) is a mortgage where the seller, rather than a bank or credit union, lends a portion of the purchase price to the buyer. The VTB is registered as a charge on title at the BC Land Title Office and structured like any other mortgage — interest rate, amortization, term, prepayment terms — but negotiated directly between buyer and seller. Common in BC on farmland, acreage, ALR parcels, and small-commercial deals where conventional lender appetite is constrained or where the seller wants tax deferral by spreading proceeds across years. Rare on residential MLS transactions.

Stress-test the vendor take-back against the buyer's primary mortgage. Most chartered banks and CMHC will not lend in first-charge position behind a VTB without disclosure — and even with disclosure, lenders treat VTB-funded down payments very differently from arm's-length cash. The OSFI B-20 stress test is calculated on the FULL housing payment, including VTB amortization and interest. Sellers offering VTBs should engage a lawyer to draft the security and a tax accountant to structure for capital-gains-reserve treatment under s. 40(1)(a)(iii) of the Income Tax Act — DIY VTBs commonly get the security wrong (e.g., taking back a promissory note unsecured by mortgage charge), making default recovery a Supreme Court action rather than a foreclosure proceeding.