Rising Interest Rates and VTB

December 29, 2022

November 30, 2022


Rising Interest Rates and VTB


As expected, the interest rates went up again and, as per Bank of Canada, it will go up yet again in the near future.


All kinds of opinions are floating around about the future of the residential real estate market, like: the full impact of increases in the rates will show in 12 to 18 months, prices will drop in Toronto by 20% by the end of 2023, inflation is already going down and therefore the interest rates will come down soon and thus we will have a good spring market, the economy is going through a contraction and it could lead to a recession, there is pull back from buyers and builders, etc., etc. ….


The good thing is that the present house prices are still very good, considering how quickly and how high the prices went up in the recent past.


Though the present rate is still better than that of yesteryears, unfortunately, the timing is bad. We are just getting over the seemingly never-ending challenges of Covid which has caused extensive long-term damages to us emotionally, psychologically, and financially, inflation and the debt rate is very high, and many homeowners are having trouble managing what they owe. What’s making it even worse, is the Ukraine/Russia situation and the possibility of recession in the US and Europe.


For the many that have mortgages, it would be a good idea to soon consult with their banks and mortgage brokers to find out how best to navigate in these times. I suggest getting at least two opinions before making any quick decisions.


In such times when some buyers will likely have problems getting a mortgage and some sellers will have difficulty selling, one way to create a win-win is for the sellers to extend a loan to the buyers at an agreed upon interest rate, duration, and other terms, to secure the sale of the property. This is a kind of mortgage which is commonly known as a Vendor Take Back (VTB).


This way the buyer can buy the property for above the amount that the banks are willing to lend, and the seller gets his property sold. As security, the seller retains equity in the property equal to the amount of mortgage till the loan is paid back. The seller benefits from giving the loan by earning interest on it. A win-win.


For much more on VTB, and/or if you are considering selling in the near future and would like an idea as to what your home is worth in today’s unpredictable market, feel free to call me for a confidential chat and I will be happy to discuss it in detail with you. You will be glad you did.


Ecko Jay

Broker of Record / Owner

Ph: 416-445-8858


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