Introduction to Private Mortgages: Private vs Institutional Lenders

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What type of mortgages do not qualify for default insurance?

Institutional mortgages

Privately funded mortgages (correct)

CMHC-approved mortgages

Low-interest mortgages

Who is qualified to offer mortgage default insurance through CMHC?

Private default insurers

National Housing Act approved lenders (correct)

Second mortgage lenders

Borrowers with low risk

Why do the majority of privately funded mortgages have higher interest rates?

Increased risk associated with this type of mortgage (correct)

Low risk associated with this type of mortgage

Regulatory requirements

To attract more borrowers

What is the primary reason borrowers require private mortgages?

To access built-up equity in their property Signup and view all the answers

What is the characteristic of an amortized mortgage?

Periodic repayments of both principal and interest Signup and view all the answers

What range do interest rates on second mortgages usually fall between?

$11% to 14% Signup and view all the answers

What defines a private lender according to the Financial Services Regulatory Authority of Ontario (FSRA)?

Any lender that is not a financial institution or approved by CMHC Signup and view all the answers

What is the primary focus of private lenders in security-based lending?

The security of the loan Signup and view all the answers

Which type of lenders are qualified to offer mortgage default insurance through CMHC?

National Housing Act approved lenders only Signup and view all the answers

What does a second mortgage mean in the context of privately funded mortgages?

It is a mortgage registered after the first mortgage Signup and view all the answers

Why do private mortgages tend to have higher fees compared to traditional mortgages?

Higher risks involved Signup and view all the answers

Which entity classifies as private lenders?

Individuals, mortgage brokerages, and mortgage administrators Signup and view all the answers

What is crucial to assessing the overall risk of an investment in private mortgages?

Market influences in real estate pricing Signup and view all the answers

What has the most significant impact on the need for private mortgages according to legislative changes?

Increased scrutiny on private lenders Signup and view all the answers

What happens to a second mortgage when the first mortgage is paid off?

It becomes the first mortgage Signup and view all the answers

Can private funded mortgages obtain default insurance from Sagen and Canada Guaranty?

No, they cannot provide default insurance for privately funded mortgages Signup and view all the answers

What are two benefits of a private mortgage for a borrower?

Lower interest rates, easy approval process Signup and view all the answers

What are two benefits of a private mortgage for an investor?

Rate of return, access to equity Signup and view all the answers

Why do privately funded mortgages typically have a one-year term?

To minimize the lender's risk by being able to assess market conditions frequently. Signup and view all the answers

How do privately funded mortgages differ from institutional mortgages in terms of repayments?

Periodic repayments for privately funded mortgages usually consist of only interest. Signup and view all the answers

Why is it mentioned in the text that a one-year term minimizes risks for private lenders?

To allow lenders to evaluate market stability within a shorter period. Signup and view all the answers

What is a characteristic of privately funded mortgages compared to institutional ones, based on the text?

Privately funded mortgages have lower average loan sizes. Signup and view all the answers

How does having a one-year term benefit private lenders in terms of market fluctuations?

It allows lenders to predict and react to potential market changes quickly. Signup and view all the answers

Why do private lenders prefer shorter terms in more volatile markets?

To minimize risks due to sudden market changes. Signup and view all the answers