24 Questions
What type of mortgages do not qualify for default insurance?
Privately funded mortgages
Who is qualified to offer mortgage default insurance through CMHC?
National Housing Act approved lenders
Why do the majority of privately funded mortgages have higher interest rates?
Increased risk associated with this type of mortgage
What is the primary reason borrowers require private mortgages?
To access built-up equity in their property
What is the characteristic of an amortized mortgage?
Periodic repayments of both principal and interest
What range do interest rates on second mortgages usually fall between?
$11% to 14%
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
What is the primary focus of private lenders in security-based lending?
The security of the loan
Which type of lenders are qualified to offer mortgage default insurance through CMHC?
National Housing Act approved lenders only
What does a second mortgage mean in the context of privately funded mortgages?
It is a mortgage registered after the first mortgage
Why do private mortgages tend to have higher fees compared to traditional mortgages?
Higher risks involved
Which entity classifies as private lenders?
Individuals, mortgage brokerages, and mortgage administrators
What is crucial to assessing the overall risk of an investment in private mortgages?
Market influences in real estate pricing
What has the most significant impact on the need for private mortgages according to legislative changes?
Increased scrutiny on private lenders
What happens to a second mortgage when the first mortgage is paid off?
It becomes the first mortgage
Can private funded mortgages obtain default insurance from Sagen and Canada Guaranty?
No, they cannot provide default insurance for privately funded mortgages
What are two benefits of a private mortgage for a borrower?
Lower interest rates, easy approval process
What are two benefits of a private mortgage for an investor?
Rate of return, access to equity
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.
How do privately funded mortgages differ from institutional mortgages in terms of repayments?
Periodic repayments for privately funded mortgages usually consist of only interest.
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.
What is a characteristic of privately funded mortgages compared to institutional ones, based on the text?
Privately funded mortgages have lower average loan sizes.
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.
Why do private lenders prefer shorter terms in more volatile markets?
To minimize risks due to sudden market changes.
Explore the key differences between private lenders and institutional lenders in the context of private mortgages. Learn about the criteria that define a private lender according to the Financial Services Regulatory Authority of Ontario (FSRA).
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