OREA Mortgage Financing 1 — Questions and Answers
Question 1: What is the minimum down payment required in Canada for a home purchase priced at $500,000?
- 5% of the purchase price (Correct answer)
- 10% of the purchase price
- 15% of the purchase price
- 20% of the purchase price
Correct answer: 5% of the purchase price
For homes priced at $500,000 or less in Canada, the minimum down payment required is 5% of the purchase price under federal mortgage rules.
Question 2: Under Ontario's Land Titles Act, how is a mortgage registered against a property?
- As a charge (Correct answer)
- As a transfer
- As a caveat
- As a lien
Correct answer: As a charge
Under Ontario's Land Titles Act, a mortgage is registered as a charge on title, giving the lender a security interest in the real property.
Question 3: Which of the following best describes the 'amortization period' in mortgage financing?
- The total time required to fully repay the mortgage (Correct answer)
- The length of time the current mortgage agreement is in force
- The period during which the interest rate remains fixed
- The number of days between scheduled mortgage payments
Correct answer: The total time required to fully repay the mortgage
The amortization period is the total time required to fully repay the mortgage loan, typically 20 to 25 years for insured mortgages in Canada.
Question 4: Which federal Crown corporation is the primary provider of mortgage default insurance in Canada?
- Canada Mortgage and Housing Corporation (CMHC) (Correct answer)
- Bank of Canada
- Canada Deposit Insurance Corporation (CDIC)
- Export Development Canada (EDC)
Correct answer: Canada Mortgage and Housing Corporation (CMHC)
CMHC is the primary federal Crown corporation providing mortgage default insurance in Canada, protecting lenders in the event of borrower default.
Question 5: A mortgage that allows the borrower to repay the full balance at any time without penalty is called:
- An open mortgage (Correct answer)
- A closed mortgage
- A convertible mortgage
- A variable-rate mortgage
Correct answer: An open mortgage
An open mortgage allows the borrower to make additional payments or repay the full mortgage balance at any time without incurring prepayment penalties.
Question 6: What is the maximum amortization period permitted for a standard insured (high-ratio) mortgage in Canada?
- 25 years (Correct answer)
- 30 years
- 35 years
- 40 years
Correct answer: 25 years
The maximum amortization period for most insured mortgages in Canada is 25 years, as required by federal mortgage insurance rules.
Question 7: In Ontario, the Mortgage Brokerages, Lenders and Administrators Act (MBLAA) is administered by:
- The Financial Services Regulatory Authority of Ontario (FSRA) (Correct answer)
- The Real Estate Council of Ontario (RECO)
- The Ontario Securities Commission (OSC)
- The Ministry of Municipal Affairs and Housing
Correct answer: The Financial Services Regulatory Authority of Ontario (FSRA)
The FSRA administers the MBLAA and is responsible for regulating mortgage brokers, agents, brokerages, and administrators in Ontario.
OREA Mortgage Financing 1
What is the minimum down payment required in Canada for a home purchase priced at $500,000?