Humber/Ontario Real Estate Course 3 Exam Practice

A salesperson drafting an offer with an assumable first mortgage and a seller take back mortgage should include:

1. A clause specifying the postponement of the seller take back mortgage

2. Clauses for both postponement and prepayment regarding the existing mortgage

3. A postponement clause specific to the first mortgage

4. A provision allowing the first mortgage's renewal without disrupting the second mortgage

5. A refinance clause detailing the impact on both mortgages

6. A plan for mortgage consolidation post-assumption

The correct answer is: A clause specifying the postponement of the seller take back mortgage

Including a clause specifying the postponement of the seller take back mortgage is essential in this context because it ensures that the seller's secondary financing will be subordinate to the primary mortgage assumed by the buyer. This means that in the event of a foreclosure, the first mortgage lender will have the first claim on the property, followed by the seller’s take back mortgage. This hierarchy is critical for protecting the interests of the first mortgage lender and ensuring that they are willing to allow the mortgage assumption to proceed. The other options, while they may address different aspects of financing or mortgage structuring, do not directly tackle the fundamental need for clarity regarding the priority of the seller take back mortgage relative to the assumable first mortgage. These complications or strategies might be relevant in specific contexts but do not fulfill the primary requirement of establishing the proper legal standing between the two mortgages in a straightforward manner.