Question

The Smiths' purchased a residence for $750,000. They made a down payment of $150,000 and agreed to assume the seller's existing mortgage, which had a current balance of $230,000. The Smiths' financed the remaining $370,000 of the purchase price by executing a second mortgage whereby the seller became a mortgagee. This type of loan is called a

A) wraparound mortgage.
B) package mortgage.
C) balloon note.
D) part (junior) purchase money mortgage.

Answer 1

A part (junior) purchase money mortgage is the type of loan described. The seller becomes a mortgagee and provides financing for the remaining amount of the purchase price.

Step-by-step explanation:

The type of loan described in the question is a part (junior) purchase money mortgage. In this type of loan, the seller becomes a mortgagee and provides financing for the remaining amount of the purchase price. The buyer makes a down payment and assumes the seller's existing mortgage, and the second mortgage is executed to cover the remaining amount. This type of loan is commonly used when the buyer doesn't have sufficient funds to cover the full purchase price.