What terms are typical in a vendor take-back mortgage for a commercial property purchase in Ontario?

A vendor take-back (VTB) mortgage is a financing arrangement where the seller, instead of receiving the full purchase price in cash at closing, agrees to finance part of it by taking back a mortgage from the buyer, effectively becoming a lender on a portion of their own sale price. This is common in commercial deals where a buyer can't fully finance the purchase through an institutional lender alone, or where a seller is willing to accept a structured payout to make the deal work.

Structurally, a VTB mortgage is usually registered in a second position, ranking behind any institutional first mortgage the buyer obtains, meaning the institutional lender gets paid first if something goes wrong. Beyond that, the specific interest rate, amortization period, and term are all individually negotiated between buyer and seller based on the deal's circumstances. There's no standard rate or structure, since terms shift with market conditions and negotiating leverage between the specific parties involved.

Because a VTB mortgage puts the seller in an ongoing lender relationship with the buyer rather than a clean exit, both sides should have a lawyer document the terms carefully, including what happens on default, rather than treating it as an informal handshake arrangement.