Humber/Ontario Real Estate Course 4 Exam Practice

Which of the following correctly describes a financing clause involving a mortgage to be assumed?

1. The minimum mortgage terms must be specified

2. Any mortgage being assumed must meet the purchaser's requirements

3. Conditional clauses for mortgages should be condition subsequent

4. Mortgage assumption clauses need lender's approval and are true condition precedent

5. Mortgage terms can't be changed after agreement

6. Always written without lender’s requirements

The correct answer is: Mortgage assumption clauses need lender's approval and are true condition precedent

The correct response highlights that mortgage assumption clauses require the lender's approval, making them a condition precedent. This refers to a condition that must be met before the contract becomes effective. In this context, the buyer assumes the existing mortgage, but for this assumption to be legally binding, the lender must agree to it. This aligns with the essential principles of real estate financing, where the lender retains control over the terms of the mortgage and the assumptions associated with it. In contrast, other options misrepresent various elements of mortgage assumptions. For example, while it's true that financing terms may need to align with the purchaser's requirements, that does not fully encompass the necessity of lender approval. Furthermore, discussing conditional clauses or their definitions, such as "condition subsequent," does not accurately relate to the nature of mortgage assumptions. Overall, lender approval is a crucial aspect that must be understood in the context of mortgage clauses in real estate transactions.