OREA Mortgage Financing 3

Question 1

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

Accepted Answer

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

Answer

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.

Question 2

A mortgage commitment letter from a lender typically includes:

Accepted Answer

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

Answer

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.

Question 3

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

Accepted Answer

44%

Answer

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.

Question 4

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

Accepted Answer

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

Answer

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.

Question 5

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

Accepted Answer

The lender against losses if the borrower defaults

Answer

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.

Ontario Real Estate Practice Test

Ontario Real Estate Practice Test

OREA Mortgage Financing 3