Humber/Ontario Real Estate Course 4 Exam Practice

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Buyer Nilson is preparing an offer for Seller Sundberg's property, with a purchase price of $422,900. Nilson will be submitting a deposit of $30,000 and arranging a new first mortgage for $250,000. However, the seller has agreed to take back a $40,000 short term second mortgage, as Nilson has to sell another property and is lacking sufficient cash at the moment. Based on this information, when creating the offer plan, the balance due on closing will be:

  1. $392,900

  2. $422,900

  3. $152,900

  4. $352,900

The correct answer is: $352,900

To determine the balance due on closing, it’s essential to consider the total purchase price, the amount of the deposit, the first mortgage, and the seller's second mortgage. The total purchase price of the property is $422,900. Nilson is providing a deposit of $30,000, which is an upfront payment that reduces the amount needed at closing. Additionally, Nilson is arranging a new first mortgage for $250,000, which is a loan that will cover part of the purchase price. The seller, Sundberg, is also offering a second mortgage of $40,000, which Nilson will take on. This means that Nilson will have access to additional funds through this loan to help with the purchase price. Now, to calculate the balance due on closing, we follow this formula: 1. Start with the purchase price: $422,900 2. Subtract the deposit: $422,900 - $30,000 = $392,900 3. Subtract the first mortgage: $392,900 - $250,000 = $142,900 4. The second mortgage doesn’t reduce the amount due at closing; rather, it provides additional financing. Hence, it is not deducted from the

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