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.