RECA RESIDENTIAL UNIT 1 EXAM
QUESTIONS WITH CORRECT
DETAILED ANSWERS
What is an equity mortgage? - Answer- a loan against the equity in the property which is
then registered on title according to its mortgage priority.
What does HELOC stand for? - Answer- Home Equity Line of Credit
Are REPs authorized to advise clients on seller financing (like if the seller wants to do a
VTB vendor take-back mortgage)? - Answer- No, REPs must insure that any seller they
are representing who is considering a VTB mortgage obtain legal counsel prior to
providing some or all of the financing required for the transaction to proceed.
What is an AFS? - Answer- Agreement for Sale - like what we did with Mom and Dad's
place. Agreement is made where the seller continues to hold the title until all payments
and terms of the AFS have been fulfilled.
What is a wraparound mortgage? - Answer- Sometimes referred to as an umbrella
mortgage.. envelops an existing mortgage. So, if they have a mortgage of 100,000 and
need 200,000 instead of getting financing for the 200,000 they get the financing for the
amount off current mortgage plus the amount needed. Benefits the borrower in the case
the wraparound mortgage interest rate is less than the rate applied on the additional
financing amount.
What is a blanket mortgage? - Answer- For larger projects, such as a builder
mortgaging a multi-housing development. Mortgage all buildings under one mortgage
and then reduce with a partial discharge as each individual unit is sold.
Is a builder's loan and a draw mortgage the same thing? - Answer- Yes
How is a builder's loan different from a mortgage on existing property? - Answer- It is
usually advanced in stages. For example; and amount fo funds advanced when the
building is 35% complete, which is when the roof is shingled, rough plumbing and
electrical components are installed, and the structure is insulated. more funds advanced
at 65% completion, which entails having the plaster and drywall complete, the furnace
installed and working and the interior walls erected. Remaining fund advanced with the
building construction is 100% complete.
What is interim financing? - Answer- Also referred to as bridge financing, is for a short
period of time, usually for a few months to a year. For example if a builder has a
, mortgage lender once the building is complete (but not before) they may need interim
financing to bridge the gap in time.
What is a participating mortgage? - Answer- Where 2 or more lenders have fractional
equitable interests in the real property, like becoming silent business partners with the
borrower.
What is a discount mortgage? - Answer- A rate lower than what the lender's posted
rates show.
What is a collateral mortgage? - Answer- A mortgage that needs extra collateral. For
example the bank doesn't think the property being bought is worth enough, so also
using your primary residence as the additional security.
What is a reverse mortgage? - Answer- For people 60+ allows them to use the equity in
the property without selling the property or having to make payments. Can borrow up to
40% of the value of the property. On the death of the borrower, the estate repays the
mortgage.
What is a leasehold mortgage - Answer- a loan secured by the lessee's interest in the
leased property. For example, a mortgage in order to build on leased land.
What the is meaning of an open mortgage vs a closed mortgage? - Answer- Open (able
to make additional payments towards principal (or pay off the whole thing) without
notice, penalty, or extra charges), closed (not able to without extra penalty fees)
3 types of mortgage rates - Answer- Fixed, variable and adjustable
Do fixed rate mortgages generally have higher interest rates? - Answer- Yes, to
compensate the lender for any rise in market interest during the term of the mortgage.
How are variable rate mortgage rates set? - Answer- Generally quoted as prime plu or a
minus a specified amount (for example prime less 0.25% or prime plus 0.25%
What does ARM and FRM stand for? - Answer- Adjustable Rate Mortgage and Fixed
rate mortgage
What is the difference between a variable rate mortgage and an adjustable rate
mortgage? - Answer- variable rate mortgage rates change when prime changes.
Adjustable changes at preset intervals (eg. Monthly, quarterly, semi-annually)
Is it possible to convert from a VRM or ARM to a FRM? - Answer- A convertibility
feature allows the variable rate mortgage or Adjustable rate mortgage to be converted
to a Fixed rate mortgage. Although lenders do not usually charge a penalty, some
conditions may apply.
QUESTIONS WITH CORRECT
DETAILED ANSWERS
What is an equity mortgage? - Answer- a loan against the equity in the property which is
then registered on title according to its mortgage priority.
What does HELOC stand for? - Answer- Home Equity Line of Credit
Are REPs authorized to advise clients on seller financing (like if the seller wants to do a
VTB vendor take-back mortgage)? - Answer- No, REPs must insure that any seller they
are representing who is considering a VTB mortgage obtain legal counsel prior to
providing some or all of the financing required for the transaction to proceed.
What is an AFS? - Answer- Agreement for Sale - like what we did with Mom and Dad's
place. Agreement is made where the seller continues to hold the title until all payments
and terms of the AFS have been fulfilled.
What is a wraparound mortgage? - Answer- Sometimes referred to as an umbrella
mortgage.. envelops an existing mortgage. So, if they have a mortgage of 100,000 and
need 200,000 instead of getting financing for the 200,000 they get the financing for the
amount off current mortgage plus the amount needed. Benefits the borrower in the case
the wraparound mortgage interest rate is less than the rate applied on the additional
financing amount.
What is a blanket mortgage? - Answer- For larger projects, such as a builder
mortgaging a multi-housing development. Mortgage all buildings under one mortgage
and then reduce with a partial discharge as each individual unit is sold.
Is a builder's loan and a draw mortgage the same thing? - Answer- Yes
How is a builder's loan different from a mortgage on existing property? - Answer- It is
usually advanced in stages. For example; and amount fo funds advanced when the
building is 35% complete, which is when the roof is shingled, rough plumbing and
electrical components are installed, and the structure is insulated. more funds advanced
at 65% completion, which entails having the plaster and drywall complete, the furnace
installed and working and the interior walls erected. Remaining fund advanced with the
building construction is 100% complete.
What is interim financing? - Answer- Also referred to as bridge financing, is for a short
period of time, usually for a few months to a year. For example if a builder has a
, mortgage lender once the building is complete (but not before) they may need interim
financing to bridge the gap in time.
What is a participating mortgage? - Answer- Where 2 or more lenders have fractional
equitable interests in the real property, like becoming silent business partners with the
borrower.
What is a discount mortgage? - Answer- A rate lower than what the lender's posted
rates show.
What is a collateral mortgage? - Answer- A mortgage that needs extra collateral. For
example the bank doesn't think the property being bought is worth enough, so also
using your primary residence as the additional security.
What is a reverse mortgage? - Answer- For people 60+ allows them to use the equity in
the property without selling the property or having to make payments. Can borrow up to
40% of the value of the property. On the death of the borrower, the estate repays the
mortgage.
What is a leasehold mortgage - Answer- a loan secured by the lessee's interest in the
leased property. For example, a mortgage in order to build on leased land.
What the is meaning of an open mortgage vs a closed mortgage? - Answer- Open (able
to make additional payments towards principal (or pay off the whole thing) without
notice, penalty, or extra charges), closed (not able to without extra penalty fees)
3 types of mortgage rates - Answer- Fixed, variable and adjustable
Do fixed rate mortgages generally have higher interest rates? - Answer- Yes, to
compensate the lender for any rise in market interest during the term of the mortgage.
How are variable rate mortgage rates set? - Answer- Generally quoted as prime plu or a
minus a specified amount (for example prime less 0.25% or prime plus 0.25%
What does ARM and FRM stand for? - Answer- Adjustable Rate Mortgage and Fixed
rate mortgage
What is the difference between a variable rate mortgage and an adjustable rate
mortgage? - Answer- variable rate mortgage rates change when prime changes.
Adjustable changes at preset intervals (eg. Monthly, quarterly, semi-annually)
Is it possible to convert from a VRM or ARM to a FRM? - Answer- A convertibility
feature allows the variable rate mortgage or Adjustable rate mortgage to be converted
to a Fixed rate mortgage. Although lenders do not usually charge a penalty, some
conditions may apply.
