BC Real Estate Trading Services Course Mortgage Financing

Question 1

What is the maximum amortization period for an insured mortgage in Canada?

Accepted Answer

25 years

Answer

30 years

Answer

35 years

Answer

20 years

Question 2

What is the minimum down payment required to purchase a home in Canada?

Accepted Answer

5% on the first $500,000 and 10% on the portion between $500,000 and $999,999, with 20% required for homes $1 million and above

Answer

20% of the purchase price for all homes

Answer

10% of the purchase price for all homes

Answer

No down payment is required in Canada

Question 3

What is 'mortgage default insurance' and when is it required in Canada?

Accepted Answer

Insurance that protects the lender against borrower default, required when the down payment is less than 20% of the purchase price

Answer

Insurance that protects the borrower if they lose their job

Answer

Insurance that covers the property against fire and natural disasters

Answer

Optional insurance that reduces the interest rate

Question 4

What is the 'stress test' for Canadian mortgages?

Accepted Answer

A requirement that borrowers must qualify at the higher of their contract rate plus 2% or the Bank of Canada's qualifying rate, to ensure they can handle rate increases

Answer

A physical examination required before mortgage approval

Answer

A test of the property's structural integrity

Answer

A credit score requirement of at least 750

Question 5

What is the difference between a 'fixed rate' and 'variable rate' mortgage?

Accepted Answer

A fixed rate stays the same for the entire term regardless of market changes, while a variable rate fluctuates with the lender's prime rate, which is influenced by the Bank of Canada's policy rate

Answer

Fixed rate mortgages are only available for commercial properties

Answer

Variable rate mortgages always have lower rates than fixed

Answer

There is no practical difference between them

Question 6

What is a 'mortgage term' versus 'amortization period'?

Accepted Answer

The term is the length of the current mortgage agreement (typically 1-5 years), while the amortization is the total time to pay off the mortgage in full (typically 25 years)

Answer

They are the same thing

Answer

The term is the total repayment period and the amortization is the renewal period

Answer

The term applies to variable rates and amortization applies to fixed rates