Paying out vendor financing

Often borrowers will purchase a property and not have enough down payment or may not be able to qualify for a mortgage at the time of purchase. A vendor looking to sell a property may offer a mortgage to the purchaser to help them purchase the property. For example, a property is being sold by a vendor for $750,000 and the purchaser is not able to qualify for a mortgage from a bank or lender but has $250,000 as a down payment. The vendor may agree to sell the property to the purchaser, take the $250,000 down payment and then offer a 1 year mortgage of $500,000 to the purchaser. The purchaser would make monthly payments on the mortgage and would have 1 year to work with a bank or lender to refinance or payout the $500,000 mortgage placed on title by the vendor.

Recently we have seen some transactions where a client is now at the end of their mortgage term with a vendor and needs to seek replacement financing. Most clients will take a mortgage from a vendor because they cannot qualify with a bank or lender or because a bank or lender does not want to finance the property type. Land transactions completed in the past two (2) years often involve a vendor mortgage and we are seeing these transactions that now require replacement financing.

If you have a vendor mortgage or have questions about how vendor financing works for real estate, please do not hesitate to email or visit

CASE STUDY: A Church and a Vendor Mortgage

Recently we were approached by a church (not for profit organization) that purchased a small commercial property but at the time did not have the financial history to approve for a conventional commercial mortgage. As a result, they gave their down payment to the vendor and the vendor agreed to give them a mortgage at a slightly higher interest for three years. They felt at the time that leasing space would be more expensive than owning space and making a mortgage payment so they completed their transaction with the vendor. They now have approached us through their commercial real estate agent looking to payout the mortgage provided by the Vendor given the current interest rate environment. With their financial statements up to date we will be working to get them a new mortgage at lower interest rates and help them own their space at a lesser cost than what they have paid previously. Their financial statements prove that they have made the payments historically at a higher interest rate which helps a bank feel comfortable that at a lower interest rate they would be able to make the new mortgage payments easily. If you would like us to provide you with some options, please email or visit