Vendor Financing + Bank Financing
Combine a bank first mortgage with a vendor take-back second to close the gap.
A blended structure combining conventional bank financing in first position with a vendor take-back (seller financing) in second position, allowing the buyer to bridge a financing gap without a larger down payment.
How It Works
The buyer obtains a first mortgage from a bank up to the maximum the bank will lend, and the seller provides a vendor take-back (VTB) mortgage for the remaining balance needed beyond the buyer's down payment. The VTB sits in second position behind the bank. This structure lets a buyer purchase with a smaller cash down payment by using the seller's financing to fill the gap. The first lender must consent to the second mortgage and assess the combined loan-to-value.
Advantages
- Reduces the cash down payment needed
- Combines conventional rates with seller flexibility
- Can enable deals that a single lender would not fund
- Seller earns interest on the second
Considerations
- Higher combined payments than a single loan
- First lender must approve the second mortgage
- Seller's second position is higher risk
- Stricter combined loan-to-value limits
Typical Use Cases
- Buyer's down payment plus bank loan is short of the purchase price
- Sellers willing to carry a second to enable the sale
- Commercial or investment property transactions
- Buyers who want to preserve cash for improvements
Ideal For
Buyers short on down payment and sellers willing to carry a second mortgage to enable the sale, where a conventional first lender will approve the combined structure.
Risk Considerations
The seller's second position is behind the bank and at higher risk. The buyer must afford both payments. If the first lender's consent is not obtained, the structure can collapse. Legal and mortgage advice is essential for all parties.
Eligibility Considerations
- The first lender must consent to the second mortgage
- The buyer must service both payments
- Combined loan-to-value must be within lender limits
- The seller must be willing and able to carry the second
Key Terms
Process Overview
- 1
Determine the bank's maximum first mortgage and the gap
- 2
Negotiate the VTB second with the seller
- 3
Obtain the first lender's consent to the second mortgage
- 4
Structure and register both mortgages on title
- 5
Close and service both loans per the agreed schedules
Frequently Asked Questions
Will the bank allow a second mortgage?
It depends on the lender and the combined loan-to-value. The first lender must consent, and many limit the total financing against the property.
Who services the VTB?
The seller (or their representative) services the second mortgage directly, while the bank services the first. Both are registered on title.
Trio is a marketplace platform, not a financial institution.
Trio Marketplace is not a financial institution, lender, mortgage brokerage or financial advisor. Trio does not provide, approve, arrange or guarantee financing. Financing products and services are provided by independent third-party providers. Eligibility, rates, fees, terms and approval decisions are determined by the applicable provider.
Providers for This Strategy
Independent providers whose services may relate to this strategy. Contact them directly to explore options.
Northstar Capital Lending (Demo)
DEMO DATA — for testing only. Not a real provider. Private lending for real estate and investment projects.
Range: 100,000 – 5,000,000 CAD
Related Strategies
Vendor Take-Back (VTB)
The seller extends a loan to the buyer as part of the purchase price.
Seller Financing
The seller acts as the lender, financing the buyer's purchase directly.