Vendor Take-Back Mortgage

All Jared wants in the whole wide world is to finally sell his $800,000 estate in Kansas so he can go live on his yacht and sail around the world. Is that so much to ask? But so far, the only person interested in buying it is his coworker Jensen, and Jensen can only get approved for a $600,000 mortgage loan. Jared isn’t about to drop the price on the house that much, and there’s no way Jensen is going to somehow manage to cough up an extra two hundred grand. So...what are they to do?

Never fear, because the vendor take-back mortgage is here to save the day. A “vendor take-back mortgage,” also commonly called a “seller take-back mortgage,” is a mortgage loan offered by the seller…to the buyer. It’s usually not for the full amount, but is only for the gap between the bank-approved financing amount and the sale price of the property. It works just like a regular mortgage loan, but the lender is the seller instead of a bank, and the borrowing requirements (like a person’s debt-to-income ratio) tend to be a little more relaxed. So, in this case, Jensen would go ahead and take out that $600,000 mortgage loan from the bank, and then he’d take out an additional $200,000 loan from Jared. As long as Jensen doesn’t end up defaulting on either loan, this scenario is a win-win: Jensen gets the house he wants, and Jared can finally sell his property and pursue his sailing dreams.