Escrow & Title
When a Montana seller has an existing mortgage, who is responsible for paying it off at closing?
AThe buyer inherits the mortgage automatically
BThe seller must pay off the existing mortgage from closing proceeds✓ Correct
CThe title company absorbs the balance
DThe seller can continue making payments after the sale
Explanation
At closing, the seller's existing mortgage must be paid off from the sale proceeds unless the buyer is specifically assuming the loan. The title company or escrow agent typically arranges the payoff and records the release of the lien.
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Key Terms to Know
Lien
A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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