Question 1

What is a vendor take-back mortgage in Florida?

Accepted Answer

Vendor take-back (VTB) mortgage: a mortgage in which the seller of real property provides financing to the buyer. The seller: acts as the lender (the seller carries a note for all or part of the purchase price; the note is secured by a mortgage on the property). Also called: seller financing, purchase money mortgage (PMM), or owner financing. In FL: VTB mortgages are common in: commercial transactions (where conventional financing is difficult), vacant land sales (where banks are reluctant to lend), and unique properties (where the buyer may not qualify for conventional financing).

Question 2

What are the terms of a typical Florida VTB mortgage?

Accepted Answer

Typical terms: down payment (10-30%: the seller requires a significant down payment to reduce risk), interest rate (typically 1-3% above market rates: reflecting the higher risk to the seller; must comply with FL usury law: Section 687.02: 18% max for individual borrowers), term (3-10 years: shorter than conventional mortgages; often with a balloon payment at the end), amortization (the loan may be amortized over 15-30 years with a balloon payment due after the shorter term), and security (the seller holds a first or second mortgage on the property). The terms: are negotiable (the seller and buyer agree on terms based on their respective needs and bargaining positions).

Question 3

What are the risks and benefits of VTB mortgages in Florida?

Accepted Answer

Seller benefits: higher sale price (sellers who finance often get a premium price), interest income (the seller earns interest on the note: a potential investment return), tax benefits (installment sale treatment: the seller spreads the capital gain over the payment period), and wider buyer pool (more buyers can afford the property when financing is available). Seller risks: buyer default (the seller must foreclose: time-consuming and expensive in FL), property deterioration (the buyer may not maintain the property), subordination (if the buyer takes a first mortgage: the VTB may be subordinated), and collection costs. Buyer benefits: easier qualification, flexible terms, and faster closing. FL: VTB mortgages must comply with: usury law, Dodd-Frank (for residential), and recording requirements.

Vendor Take-Back Mortgage

Vendor Take-Back Mortgages in Florida

What It Is

Typical Terms

Benefits and Risks

Related Terms

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