Humber/Ontario Real Estate Course 2 Exam Practice

Which is NOT an advantage of assuming an existing mortgage?

1. The seller avoids a payout penalty.

2. Existing financing terms may be more favorable.

3. The property becomes more saleable.

4. The seller is never liable if the buyer defaults.

5. No need for a new appraisal.

6. Lower transaction fees may apply.

The correct answer is: The seller is never liable if the buyer defaults.

Assuming an existing mortgage does not absolutely release the original seller from liability if the buyer defaults on the mortgage after the assumption takes place. The original seller could still potentially be held liable for the mortgage if the new buyer defaults. This is because the original seller's name would typically still be on the mortgage, making them a co-signer or guarantor. Therefore, option D is correct. Options A, B, C, E, and F are advantages of assuming an existing mortgage. - Option A states that the seller avoids a payout penalty by transferring the mortgage to the buyer. - Option B highlights that existing financing terms may be more favorable compared to obtaining a new mortgage. - Option C points out that assuming the mortgage can make the property more saleable as it presents a potential benefit to buyers. - Option E indicates that a new appraisal may not be required when assuming an existing mortgage. - Option F states that lower transaction fees may apply when assuming an existing mortgage, which can be advantageous for both parties involved in the transaction.