BC Real Estate Trading Services Course Financing & Mortgages 2

Question 1

In BC, a 'mortgage term' refers to:

Accepted Answer

The period during which the current interest rate and conditions are locked in before renewal

Answer

The mortgage term is the length of time the current rate, payment terms, and conditions apply before the mortgage must be renewed, renegotiated, or paid off. Common terms in Canada are 1-5 years.

Question 2

Which federal crown corporation provides mortgage default insurance in Canada?

Accepted Answer

Canada Mortgage and Housing Corporation (CMHC)

Answer

CMHC is Canada's national housing agency and is the primary provider of mortgage default insurance. Sagen (formerly Genworth) and Canada Guaranty are private sector alternatives.

Question 3

In BC, a 'blanket mortgage' is one that:

Accepted Answer

Covers more than one property as security for a single loan

Answer

A blanket mortgage uses two or more properties as security for one loan. It is commonly used by developers who may want to build on one lot while the mortgage covers multiple lots.

Question 4

In BC, 'equity' in a home is defined as:

Accepted Answer

The fair market value of the property minus outstanding mortgage balances

Answer

Equity is the owner's net interest in the property: the current market value minus all outstanding secured debt (mortgages, home equity lines of credit). It grows as the property appreciates and the mortgage is paid down.

Question 5

In Canada, the CMHC mortgage insurance premium for a 5% down payment is approximately:

Accepted Answer

4.00% of the insured amount

Answer

For LTV of 95% (5% down), the CMHC premium is 4.00% of the mortgage amount. Premiums decrease as the down payment increases: 3.10% for 90% LTV and 2.80% for 85% LTV.

BC Real Estate Practice Test

BC Real Estate Practice Test

BC Real Estate Trading Services Course Financing & Mortgages 2