Humber/Ontario Real Estate Course 3 Exam Practice

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What is a necessary component when offering a seller take back mortgage on a property with an existing assumable mortgage?

A postponement clause exclusive to the seller take back mortgage
A merger clause detailing mortgage consolidation
A restriction clause for the first mortgage
A refinance provision affecting both mortgages
A new appraisal clause for refinancing purposes
A flexibility clause in case of early repayment

The correct answer is: A postponement clause exclusive to the seller take back mortgage

When offering a seller take back mortgage on a property that already has an existing assumable mortgage, having a postponement clause exclusive to the seller take back mortgage is essential. This clause ensures that the seller's mortgage remains subordinate to the existing first mortgage, which is crucial in maintaining the priority of the existing mortgage holder's interest. By doing so, it allows the first mortgage lender to retain their rights in case of default and ensures that the seller’s loan does not interfere with the primary mortgage's terms and conditions. This clarity in the loan hierarchy protects both the buyer and the seller, ensuring that the financial arrangements are transparent and secure. In contrast, the other choices either do not directly address the relationship between the seller take back mortgage and the existing assumable mortgage or serve a different purpose that is not necessary for the situation at hand.