How does a vendor take-back mortgage affect the statement of adjustments in Ontario?

A vendor take-back (VTB) mortgage is a financing arrangement where the seller lends the buyer part of the purchase price, effectively acting as a lender. When a VTB mortgage is part of the deal, it affects how the purchase funds flow and how the statement of adjustments is structured.

On the statement of adjustments, the VTB mortgage appears as a credit to the buyer for the amount the seller is lending. This reduces the amount of external funds the buyer needs to bring to closing. Instead of paying that portion to the seller in cash on closing day, the buyer becomes obligated to repay it to the seller over time under the terms of the mortgage.

Both buyer and seller have important interests to protect in a VTB arrangement. The seller wants a properly registered first (or second) mortgage charge on the property to secure their loan. The buyer wants favourable interest rates, clear repayment terms, and a legally sound mortgage document. Both parties' lawyers must prepare and register the VTB mortgage as part of the closing process. This adds complexity and legal costs compared to a conventional purchase. If you are considering a VTB arrangement, engage your lawyer well in advance of the closing date.