RECA Residential Unit 6 Exam
Questions & Answers (Grade A+)
"Equity" meaning -
correct answer ✅The market value of the property, less the
outstanding balance of the mortgage and any other financial
obligation registered against the property
Definition of "Mortgage" -
correct answer ✅The pledging of real property to a loender as
security for a debt. In other words, a mortgage represents the
security over property given to a lender for repayment of a loan.
Meaning of redemption (as related to mortgages) -
correct answer ✅The act of performing the borrowers obligations
and consequential discharge of the mortgage on the property.
When the borrower or another on their behalf, pays off the debt as
promised, the mortgage is redeemed.
Meaning of "underwriter" as related to mortgage -
correct answer ✅An individual employed by a lender or insurer
who is responsible for verifying the mortgage application
information and supporting documentation, making a risk
assessment of the applicant(s) and the subject property, and
approving or declining the mortgage based on this assessment.
,RECA Residential Unit 6 Exam
Questions & Answers (Grade A+)
What is the capital market (in relation to financing)? -
correct answer ✅market of transferring funds from savers to
borrowers
What is the secondary mortgage market -
correct answer ✅the bundling and reselling of mortgages as
financial investments.
Definition of Mortgage-backed securities -
correct answer ✅A financial investment backed by pools of
mortgages. Historically, mortgage-backed securities have consisted
of insured residential mortgages. Investors receive monthly
payments from the cash flow generated by the underlying
mortgages.
2 ways to calculate interest (related to interest rates) -
correct answer ✅simple interest and compound interest
When is compound interest generally used? -
correct answer ✅charged on long-term loans (ie. greater than 1
year). Simply interest is generally charged on short-term loans (ie.
less than 1 year)
, RECA Residential Unit 6 Exam
Questions & Answers (Grade A+)
What does the Interest Act of Canada do? -
correct answer ✅a federal legislation that imposes requirements
on how interest is described and calculated for mortgages.
Does the Interest Act of Canada impose a limit on the rate that can
be charged? -
correct answer ✅No, it does not, but it does stipulate that when
the interest rate is not indicated in the mortgage agreement, the
applicable annual interest rate to be charged by the lender is 5%.
True or false - The interest Act of Canada legislation prevents a
lender from charging a higher interest rate following a default on a
mortgage of real property than that charged during the term of the
mortgage. -
correct answer ✅True
According to the criminal code of Canada, from what percentage is
an effective annual interest rate a criminal rate of interest? -
correct answer ✅above 60%
Mortgage lenders can be categorized into these 4 groups -
correct answer ✅1. Institutional lenders 2. Canadian Mortgage
Questions & Answers (Grade A+)
"Equity" meaning -
correct answer ✅The market value of the property, less the
outstanding balance of the mortgage and any other financial
obligation registered against the property
Definition of "Mortgage" -
correct answer ✅The pledging of real property to a loender as
security for a debt. In other words, a mortgage represents the
security over property given to a lender for repayment of a loan.
Meaning of redemption (as related to mortgages) -
correct answer ✅The act of performing the borrowers obligations
and consequential discharge of the mortgage on the property.
When the borrower or another on their behalf, pays off the debt as
promised, the mortgage is redeemed.
Meaning of "underwriter" as related to mortgage -
correct answer ✅An individual employed by a lender or insurer
who is responsible for verifying the mortgage application
information and supporting documentation, making a risk
assessment of the applicant(s) and the subject property, and
approving or declining the mortgage based on this assessment.
,RECA Residential Unit 6 Exam
Questions & Answers (Grade A+)
What is the capital market (in relation to financing)? -
correct answer ✅market of transferring funds from savers to
borrowers
What is the secondary mortgage market -
correct answer ✅the bundling and reselling of mortgages as
financial investments.
Definition of Mortgage-backed securities -
correct answer ✅A financial investment backed by pools of
mortgages. Historically, mortgage-backed securities have consisted
of insured residential mortgages. Investors receive monthly
payments from the cash flow generated by the underlying
mortgages.
2 ways to calculate interest (related to interest rates) -
correct answer ✅simple interest and compound interest
When is compound interest generally used? -
correct answer ✅charged on long-term loans (ie. greater than 1
year). Simply interest is generally charged on short-term loans (ie.
less than 1 year)
, RECA Residential Unit 6 Exam
Questions & Answers (Grade A+)
What does the Interest Act of Canada do? -
correct answer ✅a federal legislation that imposes requirements
on how interest is described and calculated for mortgages.
Does the Interest Act of Canada impose a limit on the rate that can
be charged? -
correct answer ✅No, it does not, but it does stipulate that when
the interest rate is not indicated in the mortgage agreement, the
applicable annual interest rate to be charged by the lender is 5%.
True or false - The interest Act of Canada legislation prevents a
lender from charging a higher interest rate following a default on a
mortgage of real property than that charged during the term of the
mortgage. -
correct answer ✅True
According to the criminal code of Canada, from what percentage is
an effective annual interest rate a criminal rate of interest? -
correct answer ✅above 60%
Mortgage lenders can be categorized into these 4 groups -
correct answer ✅1. Institutional lenders 2. Canadian Mortgage
