Vendor Take-back Mortgage Definition

A vendor take-back mortgage is a type of mortgage involving at least two funding sources-a traditional mortgage lender and the property seller (e.g. vendor). In a vendor take-back mortgage, the seller loans some funds to the buyer to facilitate the property sale; the take-back mortgage loan is secured as a secondary lien against the property (the traditional mortgage loan is secured as the primary lien).

The buyer then slowly repays both the traditional mortgage loan as well as the take-back mortgage loan, which derives its name from the rather obvious process of the seller "taking back" the loaned money. Most sellers offer a vendor take-back mortgage loan at a rate considerably below the standard market rate to make the property an attractive investment, and quite often the buyer is purchasing property valued above the amount that they would qualify for with a traditional mortgage loan.