Florida Real Estate Sales Associate Examination Content OutlineReal Estate FinanceHard
A lender is offering a mortgage that allows the borrower to obtain additional funds under the same loan without rewriting the original agreement. This type of mortgage is known as a(n):
- APurchase Money Mortgage
- BOpen-End Mortgage
- CWraparound Mortgage
- DReverse Annuity Mortgage
Show answer & explanationAnswer & explanation
Correct answer: B. Open-End Mortgage
An open-end mortgage allows the borrower to increase the principal balance at a later time, typically as a line of credit, without going through the entire loan application process again. This aligns with obtaining additional funds under the existing agreement.
Why the other options are wrong
- A. A purchase money mortgage is a loan given by the seller to the buyer as part of the purchase price.
- C. A wraparound mortgage is a junior loan that includes the balance of a prior mortgage.
- D. A reverse annuity mortgage (RAM) is another term for a reverse mortgage, allowing seniors to convert equity to cash payments.
Open-End Mortgage
A mortgage loan that allows the borrower to increase the outstanding balance of the loan up to the original amount, or the maximum specified amount, without applying for a new loan.
- Functions like a line of credit
- Uses the existing mortgage as collateral
- Convenient for future borrowing needs
Memory trick: Open-End: An 'open door' to more funds on the same loan.