A VTB mortgage is a Vendor Take Back Mortgage.
Mortgage Explaination:
The seller (Vendor) lends you a some or all of the mortgage financing on the property he is selling.
Legal Explanation:
If all of the mortgage financing then there will be a Charge/Mortgage of Land sitting in first position. (First Mortgage)
If a portion of the financing then there will be a Charge/Mortgage of Land sitting second position behind the lending institution you will be financing with (Second Mortgage).
If a you purchase the property at $300,000 and only had 10% down payment.
Example 1 -All of the mortgage financing (VTB 90%):
This is simple, you just need to sign off and let your lawyer register a mortgage for the loan amount and agreed upon interest rate on the property like you would do when you finance a property with bank.
Example 2 - A Portion (e.g.VTB 30%):
If your bank only allowed a loan of 50% loan to value then you will be short 30% because you only have 10% down payment. This is where the you can ask the vendor to give you a loan for the remaining balance.
Another scenerio is if the Vendor is willing to give you a VTB of 30% upfront, then you just need to apply for a mortgage for 50% ($150,000).
Hope this helps!
Gloria Lee
Mortgage Explaination:
The seller (Vendor) lends you a some or all of the mortgage financing on the property he is selling.
Legal Explanation:
If all of the mortgage financing then there will be a Charge/Mortgage of Land sitting in first position. (First Mortgage)
If a portion of the financing then there will be a Charge/Mortgage of Land sitting second position behind the lending institution you will be financing with (Second Mortgage).
If a you purchase the property at $300,000 and only had 10% down payment.
Example 1 -All of the mortgage financing (VTB 90%):
This is simple, you just need to sign off and let your lawyer register a mortgage for the loan amount and agreed upon interest rate on the property like you would do when you finance a property with bank.
Example 2 - A Portion (e.g.VTB 30%):
If your bank only allowed a loan of 50% loan to value then you will be short 30% because you only have 10% down payment. This is where the you can ask the vendor to give you a loan for the remaining balance.
Another scenerio is if the Vendor is willing to give you a VTB of 30% upfront, then you just need to apply for a mortgage for 50% ($150,000).
Hope this helps!
Gloria Lee
[quote user=investmart]Do other investors also find there are less seller VTB options available than in the past, in different Ontario cities? if yes, what do you think is the main reason?
Given that Canada's mortgage market is and always has been fairly efficient I'd say: It has always been somewhat difficult to get a VTB and/or a bank to approve a 2nd mortgage behind their first. It is NOT more difficult today than 2 or 4 or 6 years ago.
Just because it is difficult doesn't mean it cannot be done. it if were easy everyone would do it and be a multi-millionaire today !
There are so many ways to make in real estate that it will be a while to find a niche that suits your needs, lifestyle, $s and desires .. but it is there ! Try a few avenues .. and after many cul-de-sac's there will be a 4 lane highway for you !
Given that Canada's mortgage market is and always has been fairly efficient I'd say: It has always been somewhat difficult to get a VTB and/or a bank to approve a 2nd mortgage behind their first. It is NOT more difficult today than 2 or 4 or 6 years ago.
Just because it is difficult doesn't mean it cannot be done. it if were easy everyone would do it and be a multi-millionaire today !
There are so many ways to make in real estate that it will be a while to find a niche that suits your needs, lifestyle, $s and desires .. but it is there ! Try a few avenues .. and after many cul-de-sac's there will be a 4 lane highway for you !
I need some info for a VTB. I have Vendor that said they would consider it. He is asking $450000 and said that is firm. I need help in knowing what rates and payment terms are fair. If someone can share some examples of what they did this would be most helpful as I am a concrete learner. The more info you provide all the better. Thanks.
[quote user=Kewal]I need some info for a VTB.
we too .. for an opinion with value to you !!
area, location, size of home, purchase price, rent $s, timeline, quality, 1st mortgage, your income, plan for this deal, size, upgrade requirements ..
do you want to buy my used car ? It is only $12,000 !! Is this a great, or what ??
we too .. for an opinion with value to you !!
area, location, size of home, purchase price, rent $s, timeline, quality, 1st mortgage, your income, plan for this deal, size, upgrade requirements ..
do you want to buy my used car ? It is only $12,000 !! Is this a great, or what ??
Getting a really good first mortgage with a VTB is tricky. You almost have to prove that you don't need the money.
There are a few alternative lenders that have no issues with VTB's or second mortgage, but you may have to pay 5 to 6% or higher on the first. Just means the outlook of the property has to be very good.
There are a few alternative lenders that have no issues with VTB's or second mortgage, but you may have to pay 5 to 6% or higher on the first. Just means the outlook of the property has to be very good.
[quote user=ThomasBeyer][quote user=Kewal]I need some info for a VTB.
we too .. for an opinion with value to you !!
area, location, size of home, purchase price, rent $s, timeline, quality, 1st mortgage, your income, plan for this deal, size, upgrade requirements ..
do you want to buy my used car ? It is only $12,000 !! Is this a great, or what ??
Sorry Thomas I do not understand your response to my request for info. Could you please enlighten me. Thanks
we too .. for an opinion with value to you !!
area, location, size of home, purchase price, rent $s, timeline, quality, 1st mortgage, your income, plan for this deal, size, upgrade requirements ..
do you want to buy my used car ? It is only $12,000 !! Is this a great, or what ??
Sorry Thomas I do not understand your response to my request for info. Could you please enlighten me. Thanks
[quote user=Kewal]The more info you provide all the better.
I think Thomas is saying that, before anyone can give you comment on what would be fair, you need to provide more information.
Two examples:
1) A house has no carpet, and the paint is peeling. It's listed for 450k, but after 15k of renovations in 2 months, you're sure you could sell it for 700k. If you don't have much capital, almost any set of VTB terms would be good here. (100% financing at 15% interest, sold!). The rate doesn't matter, since you'd only be planning on keeping it for a few months, and need your cash resources to renovate.
2) A duplex/fourplex you plan to hold as a long-term investment property. You've determined based on your parameters (net income, etc) that the property fits with your plan at a price of 430,000 with conventional financing. The vendor has said that 450k is firm. Maybe if the Vendor offered you an attractive vendor takeback, that would swing the deal. (80% financing at 3% interest only payments for 5 years, or whatever else you can negotiate). The interest savings are around 18,000 compared with conventional rates, so you'd be getting your price, more or less, while the vendor can still tell his buddies that he sold for 450,000.
So can anyone say that 15% is fair? Maybe, it depends. How about 3%? Again, maybe, but it depends on the situation. If you provide no information, the best you can hope for is random hypotheticals. (Which I've attempted to provide above.)
Regards,
Michael
I think Thomas is saying that, before anyone can give you comment on what would be fair, you need to provide more information.
Two examples:
1) A house has no carpet, and the paint is peeling. It's listed for 450k, but after 15k of renovations in 2 months, you're sure you could sell it for 700k. If you don't have much capital, almost any set of VTB terms would be good here. (100% financing at 15% interest, sold!). The rate doesn't matter, since you'd only be planning on keeping it for a few months, and need your cash resources to renovate.
2) A duplex/fourplex you plan to hold as a long-term investment property. You've determined based on your parameters (net income, etc) that the property fits with your plan at a price of 430,000 with conventional financing. The vendor has said that 450k is firm. Maybe if the Vendor offered you an attractive vendor takeback, that would swing the deal. (80% financing at 3% interest only payments for 5 years, or whatever else you can negotiate). The interest savings are around 18,000 compared with conventional rates, so you'd be getting your price, more or less, while the vendor can still tell his buddies that he sold for 450,000.
So can anyone say that 15% is fair? Maybe, it depends. How about 3%? Again, maybe, but it depends on the situation. If you provide no information, the best you can hope for is random hypotheticals. (Which I've attempted to provide above.)
Regards,
Michael
[quote user=RobMacdonald]we don't know anything about it.
my point .. more info is required .. and most real estate deals are far more complex and expensive than a car .. where one item overlooked could cost you $10,000 or $125,000 .. and as bizzaro stated 15% or 3% could both be accetable terms for a VTB, DEPENDING ON THE CONTEXT !!
my point .. more info is required .. and most real estate deals are far more complex and expensive than a car .. where one item overlooked could cost you $10,000 or $125,000 .. and as bizzaro stated 15% or 3% could both be accetable terms for a VTB, DEPENDING ON THE CONTEXT !!
Here is further info: The property has 10 doors, the NOI for 2009 was $34720. I have the income/expense report for 4years. From the records I have seen the property is fully occupied. The local officials and few realators have said the area has a very tight rental market. THe prevailing cap rate for the area if 6.5. The property needs about $15000 to $20000 in renos. Has an onsight manager.
If the vendor sticks to there ask price of $45000. What kinds of terms can I didicate to move them down in their price. Thanks
If the vendor sticks to there ask price of $45000. What kinds of terms can I didicate to move them down in their price. Thanks
[quote user=Kewal]If the vendor sticks to there ask price of $45000. What kinds of terms can I didicate to move them down in their price.
45,000 ? or $450,000 ?
I assume 450K for now.
what's wrong with 45,000/door ? what's behind the door ? i.e. 1BRs ? huge 3BRs ? small studios ?
In the multi-family market SELLERS dictate prices and terms, not buyers !!
Why not write him an offer at his aksing of 450,000 with a VTB of $100,000 at 0% due in 2 years or 5 years (that is essentially a discount, but he gets his asking price) .. then get a new mortgage of 75% or $337,000 .. thus almost 0 down ? He might take it !
Worst case for him: he gets $350,000 today, defers some taxes, and gets his building back in 2 or 5 years if you default ! Low risk to seller !!
btw: NOI is a very fickle number .. does it include property management of 12% and R&M of $8000 or so / year ? What is the gross rent ? What is the expense breakout ?
45,000 ? or $450,000 ?
I assume 450K for now.
what's wrong with 45,000/door ? what's behind the door ? i.e. 1BRs ? huge 3BRs ? small studios ?
In the multi-family market SELLERS dictate prices and terms, not buyers !!
Why not write him an offer at his aksing of 450,000 with a VTB of $100,000 at 0% due in 2 years or 5 years (that is essentially a discount, but he gets his asking price) .. then get a new mortgage of 75% or $337,000 .. thus almost 0 down ? He might take it !
Worst case for him: he gets $350,000 today, defers some taxes, and gets his building back in 2 or 5 years if you default ! Low risk to seller !!
btw: NOI is a very fickle number .. does it include property management of 12% and R&M of $8000 or so / year ? What is the gross rent ? What is the expense breakout ?
[quote user=Kewal]If the vendor sticks to there ask price of $45000. What kinds of terms can I didicate to move them down in their price. Thanks
I think the first thing you should decide is how much the property is worth to you. If it's a good deal at it's current price, are you just trying to use a VTB as a hammer to get a better deal? Because if so it's probably unnecessarily complicated and likely to cost you the deal. On the other hand, if the property is likely to sit on the market at its current price, a VTB could be a win-win solution, whereby the seller gets his price and most of his money now, while you get the property with little cash down.
Regards,
Michael
I think the first thing you should decide is how much the property is worth to you. If it's a good deal at it's current price, are you just trying to use a VTB as a hammer to get a better deal? Because if so it's probably unnecessarily complicated and likely to cost you the deal. On the other hand, if the property is likely to sit on the market at its current price, a VTB could be a win-win solution, whereby the seller gets his price and most of his money now, while you get the property with little cash down.
Regards,
Michael
A VTB is a Vendor Take Back
mortgage or loan. It is simply where the seller (Vendor) of a property is willing to provide some or all
of the mortgage financing on that property.
When times are good (economy is improving, employment is rising as are incomes, all is well), you
often see fewer VTBs. This is because the access to credit (getting loans/mortgages/lines of credit) is often
`easier` and houses are selling at a steady to fast pace. Vendors are not as willing to carry financing because it
is not as difficult to sell their house. BUT, and this is a BIG BUTT, when the economy is slowing, access to credit
is more difficult, and properties are not selling as quickly, Vendors may be willing to get more creative in order
to unload that property.
Thanks
mortgage or loan. It is simply where the seller (Vendor) of a property is willing to provide some or all
of the mortgage financing on that property.
When times are good (economy is improving, employment is rising as are incomes, all is well), you
often see fewer VTBs. This is because the access to credit (getting loans/mortgages/lines of credit) is often
`easier` and houses are selling at a steady to fast pace. Vendors are not as willing to carry financing because it
is not as difficult to sell their house. BUT, and this is a BIG BUTT, when the economy is slowing, access to credit
is more difficult, and properties are not selling as quickly, Vendors may be willing to get more creative in order
to unload that property.
Thanks
For seller it is a good way to
A) get their purchase price, or
B) defer taxes, or
C) get some income for some time
As a seller I have done many VTBs ! Where else can you get a secure 6 or 8 or even 10 % with low risk of capital loss ?
Hence, as a buyer, consider sellers dilemma ! Now I've got all this cash .. What to do with it ? Where to invest ? Whynot in a propery o know well ! Worst case is to take property back !
So why not always write TWO offers ? One all cash (to seller) and one with a VTB ! It costs almost nothing to present 2 options and opens up a world of possibilities !'
A) get their purchase price, or
B) defer taxes, or
C) get some income for some time
As a seller I have done many VTBs ! Where else can you get a secure 6 or 8 or even 10 % with low risk of capital loss ?
Hence, as a buyer, consider sellers dilemma ! Now I've got all this cash .. What to do with it ? Where to invest ? Whynot in a propery o know well ! Worst case is to take property back !
So why not always write TWO offers ? One all cash (to seller) and one with a VTB ! It costs almost nothing to present 2 options and opens up a world of possibilities !'
[quote user=bizaro86][quote user=Kewal]The more info you provide all the better.
2) A duplex/fourplex you plan to hold as a long-term investment property. You've determined based on your parameters (net income, etc) that the property fits with your plan at a price of 430,000 with conventional financing. The vendor has said that 450k is firm. Maybe if the Vendor offered you an attractive vendor takeback, that would swing the deal. (80% financing at 3% interest only payments for 5 years, or whatever else you can negotiate). The interest savings are around 18,000 compared with conventional rates, so you'd be getting your price, more or less, while the vendor can still tell his buddies that he sold for 450,000.
So can anyone say that 15% is fair? Maybe, it depends. How about 3%? Again, maybe, but it depends on the situation. If you provide no information, the best you can hope for is random hypotheticals. (Which I've attempted to provide above.)
Regards,
Michael
How did you arrive @ 3%, 15% and $18,000?
2) A duplex/fourplex you plan to hold as a long-term investment property. You've determined based on your parameters (net income, etc) that the property fits with your plan at a price of 430,000 with conventional financing. The vendor has said that 450k is firm. Maybe if the Vendor offered you an attractive vendor takeback, that would swing the deal. (80% financing at 3% interest only payments for 5 years, or whatever else you can negotiate). The interest savings are around 18,000 compared with conventional rates, so you'd be getting your price, more or less, while the vendor can still tell his buddies that he sold for 450,000.
So can anyone say that 15% is fair? Maybe, it depends. How about 3%? Again, maybe, but it depends on the situation. If you provide no information, the best you can hope for is random hypotheticals. (Which I've attempted to provide above.)
Regards,
Michael
How did you arrive @ 3%, 15% and $18,000?