Ontario Mortgage Agent Practice Exam 2025 - Free Mortgage Agent Practice Questions and Study Guide

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Which type of mortgage product typically requires mortgage insurance?

Conventional mortgages with more than 20% down payment

Fixed-rate mortgages

High-ratio mortgages with less than 20% down payment

High-ratio mortgages are those where the borrower is making a down payment of less than 20% of the property's purchase price. Because these mortgages have a higher level of risk for lenders—due to the smaller equity cushion—financial institutions require mortgage insurance. This insurance protects the lender in the event that the borrower defaults on the loan.

The necessity for mortgage insurance primarily arises from the lower down payment, which can indicate a higher likelihood of default. Consequently, borrowers are typically required to obtain mortgage insurance through providers like the Canada Mortgage and Housing Corporation (CMHC) or private insurers when their down payment is below the threshold of 20%. This requirement is instrumental in reducing the lender's risk and ultimately makes it feasible for borrowers to access home financing with limited upfront capital.

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Variable-rate mortgages with no down payment

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