Mortgage Financing Flashcards
7 cards from real OREA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mortgage Financing flashcards as text
A 'high-ratio mortgage' in Canada is defined as a mortgage where:
Answer: The borrower's down payment is less than 20% of the purchase price
A high-ratio mortgage occurs when the down payment is less than 20% of the purchase price, requiring mandatory mortgage default insurance under federal regulations.
Which of the following best describes a vendor take-back (VTB) mortgage?
Answer: The seller provides financing directly to the buyer as part of the property transaction
In a vendor take-back mortgage, the seller acts as the lender, providing some or all of the financing to the buyer, which is recorded as a mortgage on the property.
The Gross Debt Service (GDS) ratio measures:
Answer: Monthly housing costs as a percentage of gross monthly income
The GDS ratio measures housing costs—principal, interest, property taxes, and heating—as a percentage of gross monthly income, with most lenders capping it at 32%.
What is the standard maximum GDS ratio accepted by most institutional lenders in Canada?
Answer: 32%
Most institutional lenders in Canada apply a maximum GDS ratio of 32%, meaning housing costs should not exceed 32% of gross monthly income.
In mortgage financing, a 'blended payment' refers to:
Answer: A regular payment that combines both principal repayment and interest
A blended payment combines principal repayment and interest into one consistent payment amount, which remains constant throughout the term of a fixed-rate mortgage.
A second mortgage is best described as:
Answer: An additional mortgage registered on the same property after the first mortgage
A second mortgage is an additional mortgage registered on the same property as an existing first mortgage, with a subordinate priority claim against the property if the borrower defaults.
What is the maximum loan-to-value (LTV) ratio for a conventional (uninsured) mortgage in Canada?
Answer: 80%
A conventional mortgage requires a minimum down payment of 20%, resulting in a maximum loan-to-value ratio of 80% and no requirement for mortgage default insurance.