Chapter 2: Basic Mortgage Concepts

Question 1

Discuss the difference between a mortgage and a car loan

Answer 1

A mortgage is a loan secured by real property while a car loan is a loan secured by registering a loan against the car under the Personal Property Security Act. The difference is the security.

Question 2

There are two mortgages registered against the title of Barbara’s property. One was registered on May 20, 2006 and the other was registered on March 17, 2005. Which is the 1st mortgage and which is the 2nd?

Answer 2

1. March 17, 2005

2. May 20, 2006

Question 3

Jonathan owns a house valued at $250,000 with a current 1st mortgage that has a balance of $190,000.

Jonathan has credit card debts of $12,500 that he wishes to consolidate by increasing his first mortgage. Would Jonathan require a conventional or high ratio mortgage?

Answer 3

190,000 + 12,500 = 202,500

202,500 / 250000 = 0.81

Any mortgage with an LTV of greater than 0.80 is considered a high ratio mortgage. Therefore Jonathan has a high ratio mortgage.

Question 4

What is the purpose of a Charge/Mortgage

Answer 4

A document that illustrates a charge is registered against the property.

A borrower receives this as proof that a loan has been made using their property as security.

A loan secured by real property.

Question 5

Name and describe three of the main Borrower obligations under a mortgage contract (6)

Answer 5

1. Repay the loan
2. Insure the property (adequate property insurance)
3. Maintain the property (keep in good condition)
4. Not to commit waste (waste - a legal term that includes action or conduct that results in damage to the property or loss or property value.
5. Pay property taxes
6. Follow the terms of the Standard Charge Terms

Question 6

Every mortgage comes with a set of Standard Charge Terms. Discuss the purpose of this document and its importance in the mortgage transaction.

Answer 6

The Standard Charge Terms make up the bulk of the mortgage contract.

They contain detailed information on the Borrower’s obligations and the remedies available to the Lender if the Borrower does not meet these obligations.

This document is completed by the Lender and must be registered with the Director of Titles under the Land Titles Act. Many Lenders’ Standard Charge Terms can be viewed at www.teraview.ca/ereg/ereg_fidocs.html