Question

Elaine has agreed to purchase George's property and assume the existing first mortgage. Unfortunately, Elaine does not have enough money to cover the equity. George has extended a loan to Elaine in the form of a second mortgage. This arrangement is known as a:

a) First mortgage.
b) Reverse mortgage.
c) Blanket mortgage.
d) Vendor take-back mortgage.

Answer 1

The arrangement described is a vendor take-back mortgage, where the seller extends a loan to the buyer to help finance the purchase. Option a

Step-by-step explanation:

The scenario described in the student's question involves Elaine purchasing a property from George and assuming the existing first mortgage. Since Elaine cannot pay the full equity required, George provides her with a second mortgage to cover the shortfall.

This financing arrangement where the seller extends credit to the buyer to purchase the seller's property is known as a vendor take-back mortgage. This is because the seller (vendor) is 'taking back' a mortgage, thereby facilitating the sale. Option a