BC Real Estate Trading Services Course Financing & Mortgages 4

Question 1

In BC, a 'Home Equity Line of Credit' (HELOC) is:

Accepted Answer

A revolving credit facility secured against home equity that can be drawn and repaid flexibly

Answer

A HELOC is a revolving credit facility secured by a registered charge against the property. Borrowers can draw, repay, and redraw up to the approved limit, paying interest only on amounts drawn.

Question 2

In BC, 'mortgage assumption' occurs when:

Accepted Answer

A new buyer takes over the seller's existing mortgage with lender approval

Answer

Mortgage assumption occurs when the buyer takes over the seller's existing mortgage, continuing the same terms. The lender must approve the assumption. The seller may remain liable unless the lender provides a release.

Question 3

In BC, a 'collateral mortgage' is different from a conventional mortgage because:

Accepted Answer

It is registered for an amount higher than the loan advanced, using a promissory note, and is not easily transferred to another lender

Answer

A collateral mortgage registers a charge (often 100-125% of value) backed by a promissory note rather than the mortgage contract itself. It cannot be transferred to another lender — the borrower must discharge and re-register, incurring costs.

Question 4

In BC, the minimum down payment for a purchase price between $500,000 and $999,999 is:

Accepted Answer

5% of the first $500,000 plus 10% of the portion above $500,000

Answer

Canada's rules require: 5% on the first $500,000 and 10% on the portion between $500,000 and $999,999. For $1M+, 20% is required. This tiered structure means the effective minimum down payment increases with price.

Question 5

In BC, which factor would MOST likely lead a lender to decline a mortgage application?

Accepted Answer

The applicant's TDS ratio is 52%, well above the maximum

Answer

A TDS ratio of 52% exceeds the maximum allowable threshold (typically 44%). Lenders decline mortgages where total debt servicing is too high relative to income, as it suggests the borrower cannot afford all obligations.

BC Real Estate Practice Test

BC Real Estate Practice Test

BC Real Estate Trading Services Course Financing & Mortgages 4