Ontario Mortgage Agent L2 flashcards
Ontario Mortgage Agent L2 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Mortgage agent Level 2
- A licensed Ontario mortgage agent who has completed the higher education requirement and may deal in all mortgage types and supervise Level 1 agents under a brokerage.
- Conflict of interest disclosure
- A written statement to the borrower identifying any personal or financial interest the agent or brokerage has in the transaction, made before the borrower commits.
- Mortgage brokerage agreement
- A written contract between the brokerage and the borrower that sets out services, fees, and the terms of engagement, signed before mortgage services are provided.
- Cost of borrowing disclosure
- A mandatory written statement of the total cost of credit, including interest and fees, provided to the borrower before the mortgage commitment is finalized.
- Interest rate differential
- A prepayment penalty calculation that multiplies the rate difference between the contract rate and the current rate by the balance and remaining term.
- High-ratio mortgage
- A mortgage with a loan-to-value ratio above 80% of the property value, which requires default insurance from CMHC, Sagen, or Canada Guaranty.
- Secondary mortgage market
- The market where existing mortgages are sold to investors or pooled into mortgage-backed securities, which replenishes lender funds and affects mortgage pricing.
- Readvanceable HELOC
- A secured line of credit combined with a mortgage that automatically increases available credit as the mortgage principal is repaid over time.
- Gross debt service ratio
- The percentage of gross annual income used for mortgage principal and interest, property taxes, heating, and half of condominium fees; the standard limit is 39%.
- Total debt service ratio
- The percentage of gross annual income used for housing costs plus all other debt payments, such as credit cards, car loans, and personal loans.
- Mortgage stress test
- A qualifying rule requiring borrowers to be assessed at the greater of the contract rate plus two percent or the posted benchmark rate.
- Self-employed income averaging
- A verification method that averages two years of net income from T1 General returns and notices of assessment, adding back non-cash expenses.
- Gifted down payment
- Funds provided by an immediate family member for a down payment, documented by a signed gift letter confirming no repayment is required.
- Sales comparison approach
- A valuation method that estimates property value by analyzing recent sales of comparable properties, with adjustments for differences in features and location.
- Capitalization rate
- A rate used in the income approach, calculated as net operating income divided by property value, reflecting the property's income return.
- Loan-to-value ratio
- The mortgage amount divided by the property's appraised value or purchase price, whichever is lower, expressed as a percentage.
- Status certificate review
- An examination of a condominium's reserve fund, budget, litigation, and management to assess financial health before lending on a unit.
- FINTRAC obligations
- Anti-money-laundering duties requiring client identification, recordkeeping, and reporting of suspicious transactions and large cash amounts by regulated entities.
- Income fraud red flags
- Indicators such as altered pay stubs, employment letters that cannot be verified, and income inconsistent with the borrower's occupation or account activity.
- Title search review
- An examination of the property's registered ownership and encumbrances to confirm clear title and disclose any undisclosed mortgages or liens.
- Underwriting conditions
- Requirements the borrower must satisfy and document, such as income verification or appraisal review, before the lender advances mortgage funds.
- Mortgage payment formula
- P = [r × PV] / [1 − (1 + r)^−n], where r is the periodic rate and n is the number of payments, used to calculate a fully amortizing payment.
- Accelerated bi-weekly payments
- Payments equal to half the monthly payment made every two weeks, producing 26 payments or the equivalent of 13 monthly payments each year.
- Semi-annual compounding
- The standard Canadian convention in which interest is compounded twice per year, not in advance, making the effective annual rate higher than the nominal rate.
- Three months interest penalty
- A prepayment charge equal to three months of interest on the outstanding balance, commonly applied to variable-rate and some closed mortgages.
- Power of sale
- An Ontario enforcement remedy allowing the lender to sell the mortgaged property without court foreclosure after serving notice and allowing redemption.
- Redemption period
- The time after a notice of sale during which the borrower may pay the arrears and costs to stop the sale, typically 35 days in Ontario.
- Deficiency after sale
- The shortfall remaining when sale proceeds are less than the debt owed, which the borrower remains liable for unless the lender discharges it.
- Debt service coverage ratio
- Net operating income divided by annual debt service, used in commercial lending to measure whether property income covers mortgage payments.
- Net operating income
- Gross rental income minus operating expenses such as taxes, insurance, maintenance, and management, excluding mortgage payments and capital costs.
- Vendor take-back mortgage
- Financing provided by the property seller to the buyer, registered as a second mortgage and often used to bridge a funding gap.
- Bridge financing
- Short-term interest-only financing used to close a purchase before the sale proceeds of another property become available.