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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

  1. Under Canada's mortgage stress test (OSFI B-20 guidelines), uninsured mortgage applicants must qualify at:

    Answer: The higher of the contract rate plus 2% or the OSFI minimum qualifying rate

    The B-20 stress test requires uninsured mortgage applicants to qualify at the higher of their contract rate plus 2% or OSFI's minimum qualifying rate, ensuring borrowers can handle rate increases.

  2. A mortgage commitment letter from a lender typically includes:

    Answer: The approved loan amount, interest rate, term, amortization, and any conditions

    A mortgage commitment letter outlines the key terms of the approved mortgage, including loan amount, interest rate, term, amortization period, and any conditions that must be met before funding.

  3. The maximum Total Debt Service (TDS) ratio most institutional lenders in Canada will accept is:

    Answer: 44%

    Most institutional lenders accept a maximum TDS ratio of 44%, meaning total monthly debt obligations—including housing costs and all other debts—should not exceed 44% of gross income.

  4. When a buyer assumes an existing mortgage, the original borrower:

    Answer: May remain liable for the debt unless the lender formally releases them

    When a mortgage is assumed, the original borrower remains liable for the debt unless the lender grants a formal release (novation), substituting the new borrower as the sole obligor.

  5. Mortgage default insurance (such as CMHC insurance) is designed to protect:

    Answer: The lender against losses if the borrower defaults

    Mortgage default insurance protects the lender (not the borrower) by covering losses if the borrower defaults, which makes high-ratio lending less risky for financial institutions.

  6. A mortgage discharge in Ontario refers to:

    Answer: The formal removal of a mortgage from property title after the debt is fully repaid

    A mortgage discharge is the legal process of removing the lender's charge from property title once the mortgage debt has been fully repaid, confirming the lender's security interest has been extinguished.

  7. In Ontario, who is legally authorized to prepare and register mortgage documents?

    Answer: A licensed lawyer

    In Ontario, preparing and registering mortgage documents constitutes the practice of law and must be performed by a licensed lawyer, not a mortgage broker or real estate salesperson.