Ontario Mortgage Agent L1 cheat sheet

FSRA regulates mortgage brokers, agents, and administrators in Ontario under the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA).

Licence classes: mortgage brokerage, mortgage broker, mortgage agent, mortgage agent level 2, and mortgage administrator; each has separate education and experience requirements.

A mortgage agent must be authorized to deal or trade in mortgages by a licensed brokerage; agents cannot act independently of a sponsoring brokerage.

Level 1 agent licensing requires completion of an approved education course and passing the FSRA licensing exam; Level 2 requires additional experience and education.

Brokerages must designate a principal broker who holds a broker licence and is responsible for supervision and compliance.

Disclosure obligations include providing the consumer a written disclosure of the brokerage's relationship with lenders and any conflict of interest before a mortgage is arranged.

Licensees must report material changes (e.g., address, employment, criminal charges) to FSRA within prescribed timeframes and renew licences annually.

FSRA may suspend, revoke, or impose conditions on a licence for misconduct, and can issue administrative penalties and compliance orders.

A mortgage is a charge on real property securing repayment of a debt; the borrower gives the lender a charge, while the promissory note or mortgage covenant evidences the debt.

Principal is the amount borrowed; interest is the cost of borrowing; amortization is the schedule of repayment over the full term; the term is the period the current rate and conditions apply.

Closed mortgage: limited prepayment privileges and penalties for early payout; open mortgage: flexible prepayment and payout, typically at a higher rate.

Fixed rate: interest rate constant for the term; variable rate: rate fluctuates with the lender's prime or reference rate, affecting payment or amortization.

Payment frequency options include monthly, semi-monthly, bi-weekly, and weekly; accelerated bi-weekly payments shorten amortization by making 26 half-payments per year.

Key documents: mortgage application, credit report, income verification, property appraisal, commitment letter, and the mortgage charge registered on title.

Loan-to-value (LTV) ratio = mortgage amount divided by property value, expressed as a percentage; it drives insurance and lender requirements.

Prepayment penalty on closed mortgages is typically three months' interest or the interest rate differential (IRD), whichever is greater.

Residential mortgage types include conventional (LTV up to 80%), high-ratio (LTV above 80% requiring mortgage default insurance), and home equity lines of credit (HELOCs).

Mortgage default insurance is required for high-ratio mortgages; in Canada it is provided by CMHC, Sagen (formerly Genworth), and Canada Guaranty.

Insured mortgages must meet insurer and OSFI rules, including maximum amortization of 25 years for high-ratio insured loans and a maximum purchase price cap for insured mortgages.

Lender categories: chartered banks, credit unions/caisses populaires, trust companies, monoline lenders, private lenders, and mortgage investment corporations (MICs).

Private lenders and MICs typically charge higher rates and fees and lend on equity or alternative criteria; they are not subject to the same federal underwriting guidelines as banks.

A HELOC registered as a collateral charge may allow re-advancing; a standard charge is limited to the original loan amount.

Bridge financing covers the gap between closing on a new home and receiving proceeds from the sale of the existing home.

Second mortgages and equity loans sit behind a first charge and carry higher rates reflecting subordinate security.

Gross debt service (GDS) ratio = (mortgage principal and interest + property taxes + heating + 50% of condo fees) divided by gross annual income; guideline maximum is 39% for insured loans.

Total debt service (TDS) ratio = (GDS costs + all other debt payments) divided by gross annual income; guideline maximum is 44% for insured loans.

The stress test (minimum qualifying rate) requires qualification at the greater of the contract rate plus 2% or 5.25% for insured mortgages, and the greater of contract rate plus 2% or the benchmark rate for uninsured.

Minimum down payment: 5% on the first $500,000 of purchase price and 10% on the portion above $500,000 up to $1,000,000; 20% required for purchase prices of $1,000,000 or more.

Acceptable down payment sources include savings, RRSP Home Buyers' Plan withdrawals, gifted funds from immediate family, and proceeds from sale; borrowed down payments are generally restricted for insured loans.

Credit report factors: beacon score, payment history, utilization, length of credit history, and inquiries; a score of 680 or higher typically qualifies for best rates.

Income verification: salaried borrowers provide employment letters and pay stubs; self-employed borrowers provide notices of assessment and T1 generals, often averaged over two years.

Rental income is generally included at 50% of gross rents for owner-occupied properties and up to 100% for investment properties, subject to lender policy.

Monthly payment on a fixed-rate mortgage: P = [r × PV] / [1 − (1 + r)^−n], where r is the monthly rate (annual rate divided by 12) and n is the number of monthly payments.

Canadian mortgages compound semi-annually; convert the nominal annual rate to an effective monthly rate using r_monthly = (1 + i/2)^(2/12) − 1.

Amortization balance after k payments: B = PV × (1 + r)^k − PMT × [((1 + r)^k − 1) / r].

Interest portion of a payment = outstanding balance × periodic rate; principal portion = payment − interest.

GDS and TDS ratios must be computed using the qualifying (stress-tested) payment, not the contract payment, for insured mortgages.

LTV = loan amount / property value; for a purchase, value is the lesser of purchase price and appraised value.

Prepayment penalty (three months' interest) = outstanding balance × annual rate × 3/12.

Total interest over the amortization can be estimated as (payment × number of payments) − principal; accelerated bi-weekly payments reduce total interest.

Red flags: altered income documents, undisclosed second mortgages, straw buyers, inflated appraisals, and mismatched signatures or addresses.

Mortgage fraud includes application fraud, appraisal fraud, title fraud, and identity theft; licensees must report suspected fraud to the brokerage and lender.

Licensees must verify borrower identity using government-issued photo ID and confirm the source of down payment funds.

The Mortgage Brokerages, Lenders and Administrators Act prohibits unfair or deceptive practices and requires disclosure of fees, conflicts, and lender relationships.

Commission disclosure: the brokerage must disclose how it is compensated (lender-paid, borrower-paid, or both) and the amount or method of calculation.

Best-interest duty: agents must act in the consumer's best interest, present suitable options, and document the rationale for the recommended mortgage.

Privacy obligations under PIPEDA require consent for collection, use, and disclosure of personal information and secure retention of client files.

Anti-money-laundering obligations: mortgage brokerages are reporting entities under FINTRAC and must conduct identity verification, record-keeping, and suspicious transaction reporting.