California Real Estate Practice Exam

In which of the following would you use a "package mortgage"?

1. When encumbering real property and using personal property as additional collateral.

2. When securing additional financing from the lender at a later date without rewriting the original loan.

3. When covering more than one parcel of land in a subdivision.

4. None of the above

The correct answer is: When encumbering real property and using personal property as additional collateral.

A package mortgage is designed to secure a loan by using both real property (like a home or land) and personal property (such as furniture, equipment, or other movable assets) as collateral. This type of mortgage is particularly useful in situations where the borrower wants to include personal property within the financing arrangement, thus making the loan a more comprehensive package. By offering both types of collateral, the borrower may have greater leverage with the lender, potentially leading to more favorable loan terms. In contrast, securing additional financing later without rewriting the original loan pertains more to a different type of financing structure, which doesn't specifically involve package mortgages. Covering multiple parcels in a subdivision usually involves different financing strategies, often using separate mortgages for each parcel rather than packaging them together. Therefore, utilizing a package mortgage clearly aligns with the scenario presented in the first choice, making it the appropriate answer to the question.