Canadian Real Estate/Seller Loans Downpayment?


Dear David,
Thank you for taking the time to read.
Is it possible/legal for the seller to pull equity out of the property for sale and give the down payment to buyer?
The buyer is currently renting the property from the seller.
The repayment of the downpayment "loan" would be achieved by adding the down payment amount to the seller's desired selling price.
Thank you in advance for your time and consideration.

I am not sure if you are the seller or buyer but I will tell you more from a sellers point of view first.

I would maybe recommend what is called a 'seller/vendor take back mortgage'.
You would have to be in second place to the bank, but you can still force a power of sale in case of default.  If you are using standard forms for trading real estate you 'promise' to give free & clear title of the property to the buyer.  I just googled a quick explanation here you can read about the mortgage.

The other solution to for the buyer to take a HELOC - Home Equity Line Of Credit on the property once he takes title.   You can not legally transfer property if there is still a lean on it with standard OREA forms.

This is really a question for your lawyer and if they can draft up something where the buyer agrees to take title with the outstanding loan on it I am sure it is no problem, but if he does not pay you then you will not be able to force the power of sale.  The take-back mortgage gives you much more power.  Really it boils down to the contract and the lawyers can draft anything as long as he agrees.

You also don't need a down-payment of more than $1 to buy a house so why not just do that?

Best Regards


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David Sussman


Residential Real Estate Questions in Ontario such as financing possibilities, clauses, how to choose the right agent, buying/selling your home/condo and anything else that relates to real estate trading such as what my home is worth or tips and hints for how to protect yourself as a buyer or seller.


Residential Real Estate Agent in the City of Toronto for Royal LePage, Signature Realty.

Toronto Real Estate Board Canadian Real Estate Association Royal LePage Signature Realty

Carleton University, B.A. and Business Management from U of T

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