Conventional and High-Ratio Mortgages

KNOWLEDGE EXPECTED OF: QAFP® Professionals

Highest Knowledge Level: Evaluation

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

  • Define a mortgage.
  • Identify that a pre-approval process exists for obtaining a mortgage. 
  • Explain the limitations that may be associated with a mortgage pre-approval.
  • Explain the advantages and disadvantages of a rate guarantee.
  • Identify sources of down payment that may be used for the purchase of a property, such as:   
    • Savings
    • Gift
    • RRSP
    • Proceeds from the sale of an existing property
    • Other credit
  • Calculate the mortgage amount required given the value of a down payment.
  • Explain costs that may be associated with obtaining a mortgage, such as:
    • Appraisal fees
    • Survey fees
    • Legal fees
    • Discharge & disbursement fees
    • Administration fees
    • Mortgage broker fees
    • Property inspection fees
    • Title insurance fees
    • Land transfer fees / tax
    • GST / HST
    • Environmental assessment fees
    • Registration fees
  • Identify the maximum threshold permitted for a conventional and insured mortgage.
    • Loan-to-value for purchases
    • Loan-to-value for refinances
  • Calculate loan-to-value (LTV). 
  • Calculate the terms of a mortgage based on the maximum loan-to-value permitted and when given GDSR and TDSR thresholds.    
  • Explain features of a mortgage, such as:
    • Convertibility
    • Portability
    • Assumability
    • Mortgage cash account
    • Cashback
    • Interest capitalization (i.e., skip payment)
    • Prepayment options
  • Explain for whom each feature of a mortgage may be suitable. 
  • Define high-ratio mortgage. 
  • Identify providers of mortgage default insurance.
  • Explain the purpose of mortgage default insurance. 
  • Identify lenders who offer high-ratio mortgages.
  • Identify sources of down payment that may be used for the purchase of a property using a high-ratio mortgage, such as:   
    • Savings
    • Gift
    • RRSP
    • Proceeds from the sale of an existing property
    • Funds borrowed against proven assets
  • Identify when mortgage default insurance may be required based on the loan-to-value (LTV) ratio.
  • Identify the general requirements to qualify for mortgage default insurance, such as:
    • Location of property
    • Maximum purchase price or as-improved property value
    • Minimum down payment
    • Source of down payment
    • Maximum GDSR and TDSR
    • Credit approval from lender
    • Payment of closing costs
  • Identify that mortgage default insurance may be limited by the characteristics of the property. 
  • Identify the premiums for mortgage default insurance.
  • Calculate the total premium for mortgage default insurance given the schedule of premiums.
  • Calculate the total credit cost over the lifetime of the mortgage using mortgage default insurance. 
  • Calculate the additional down payment required to avoid mortgage default insurance.  
  • Compare paying mortgage default insurance premiums at the time of purchase versus financing them with a mortgage. 
  • Identify that a portion of mortgage default insurance premiums may not be financed.
  • Explain maturity or renewal options for a mortgage.
  • Determine how each of these factors may impact the suitability of a mortgage:
    • Purpose of credit or borrowed funds
    • Amount of credit requested / required
    • Ongoing need for borrowing capacity
    • Expected variability of interest rates
    • Cost, including interest and fees
    • Impact on cash flow
    • Payment options (schedule, amounts, options)
    • Expected prepayments
    • Collateral requirements
    • Expected lifetime of collateral (if applicable)
    • Closure requirements / costs
    • Tax impact
  • Evaluate how each of the factors may impact the suitability of a mortgage.
  • Determine how each of these factors may impact the suitability of an open mortgage:
    • Cost, including nominal interest rate
    • Expectation of prepayments
    • Penalties related toplans to sell property
  • Evaluate how each of the factors may impact the suitability of an open mortgage. 
  • Determine how each of these factors may impact the suitability of a closed mortgage:
    • Cost, including nominal interest rate
    • Expectation of prepayments
    • Penalties related to plans to sell property
  • Evaluate how each of the factors may impact the suitability of a closed mortgage. 
  • Determine how each of these factors may impact the suitability of a fixed rate mortgage:
    • Cost, including nominal interest rate
    • Expectation of interest rate changes in the future
    • Comfort with fluctuations in payment and/or amortization
    • Financial capacity to handle fluctuations in cash flow
  • Evaluate how each of the factors may impact the suitability of a fixed rate mortgage.
  • Determine how each of these factors may impact the suitability of a variable rate mortgage:
    • Cost, including nominal interest rate
    • Expectation of future interest rate changes
    • Comfort with fluctuations in payment and/or amortization
    • Financial capacity to handle fluctuations in cash flow
  • Evaluate how each of the factors may impact the suitability of a variable rate mortgage.
  • Identify the charges that may be associated with breaking and renegotiating a mortgage agreement, such as:
    • Prepayment charges / penalties
    • Administration fees
    • Appraisal fees
    • Reinvestment fees
    • Legal and registration fees to discharge the original mortgage charge and register a new mortgage charge
    • Repayment of benefits received with original mortgage (i.e., cash back)
  • Identify potential methods that may be used to reduce prepayment charges when paying out or discharging a mortgage, such as:
    • Making prepayments up to allowable limits before making final payment
    • Increasing payments up to allowable limits until time of final payment
  • Identify options for paying prepayment charges when breaking a mortgage agreement, such as:
    • Pay in cash
    • Add to new mortgage balance and finance over lifetime of the mortgage
    • Add to mortgage rate and finance over term of the mortgage
  • Identify options available when breaking mortgage agreement in favour of lower interest rates, such as:
    • Pay off entire mortgage and set new mortgage up with current lender at a lower interest rate
    • Pay off entire mortgage and set new mortgage up with different lender at a lower interest rate
    • “Blend and extend” mortgage with current lender 
  • Determine how each of these factors may impact the decision to break a mortgage agreement:
    • Costs
      • Prepayment costs
      • Discharge fees
      • Registration fees for a new mortgage
    • Impact on cash flow
    • Impact on interest cost
      • Over the remaining term of the mortgage
      • Over the amortization of the mortgage
    • Impact on balance of mortgage at end of the mortgage term
    • Impact on amortization of mortgage
    • Expectations for future interest rates
    • Potential to port mortgage to another property
    • Potential for mortgage to be assumed
    • Individual attitudes / preferences
  • Evaluate how each of the factors may impact the decision to break a mortgage agreement.
  • Calculate the impact of breaking a mortgage agreement.
    • On cash flow
    • On Interest cost
      • Over the remaining term of the mortgage
      • Over the amortization of the mortgage
    • On the balance of the mortgage at the end of the mortgage term
    • On the amortization of the mortgage

KNOWLEDGE EXPECTED OF: CFP® Professionals

Highest Knowledge Level: Evaluation

Knowledge Levels and Associated Verbs


Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
Define
To state exactly the meaning of
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
Compare
To note the similarities and differences between two or more things
Estimate
To determine an approximate value for
Calculate
To find the value using mathematics
Convert
To change from one form or purpose to another
Evaluate
To reach a conclusion or make a through careful study
Interpret
To give the meaning of / to construe or understand / to translate orally

Hold cursor over or click on each term to read its definition.

  • Define a mortgage.
  • Identify that a pre-approval process exists for obtaining a mortgage.
  • Explain the limitations that may be associated with a mortgage pre-approval.
  • Explain the advantages and disadvantages of a rate guarantee.
  • Identify sources of down payment that may be used for the purchase of a property, such as:   
    • Savings
    • Gift
    • RRSP
    • Proceeds from the sale of an existing property
    • Other credit
  • Calculate the mortgage amount required given the value of a down payment.
  • Explain costs that may be associated with obtaining a mortgage, such as:
    • Appraisal fees
    • Survey fees
    • Legal fees
    • Discharge & disbursement fees
    • Administration fees
    • Mortgage broker fees
    • Property inspection fees
    • Title insurance fees
    • Land transfer fees / tax
    • GST / HST
    • Environmental assessment fees
    • Registration fees
  • Identify the maximum threshold permitted for a conventional and insured mortgage.
    • Loan-to-value for purchases
    • Loan-to-value for refinances
  • Calculate loan-to-value (LTV).
  • Calculate the terms of a mortgage based on the maximum loan-to-value permitted and when given GDSR and TDSR thresholds.   
  • Explain features of a mortgage, such as:
    • Convertibility
    • Portability
    • Assumability
    • Mortgage cash account
    • Cashback
    • Interest capitalization (i.e., skip payment)
    • Prepayment options
  • Explain for whom each feature of a mortgage may be suitable. 
  • Define high-ratio mortgage. 
  • Identify providers of mortgage default insurance.
  • Explain the purpose of mortgage default insurance. 
  • Identify lenders who offer high-ratio mortgages.
  • Identify sources of down payment that may be used for the purchase of a property using a high-ratio mortgage, such as:   
    • Savings
    • Gift
    • RRSP
    • Proceeds from the sale of an existing property
    • Funds borrowed against proven assets
  • Identify when mortgage default insurance may be required based on the loan-to-value (LTV) ratio.
  • Identify the general requirements to qualify for mortgage default insurance, such as:
    • Location of property
    • Maximum purchase price or as-improved property value
    • Minimum down payment
    • Source of down payment
    • Maximum GDSR and TDSR
    • Credit approval from lender
    • Payment of closing costs
  • Identify that mortgage default insurance may be limited by the characteristics of the property. 
  • Identify the premiums for mortgage default insurance.
  • Calculate the total premium for mortgage default insurance given the schedule of premiums.
  • Calculate the total credit cost over the lifetime of the mortgage using mortgage default insurance. 
  • Calculate the additional down payment required to avoid mortgage default insurance.  
  • Compare paying mortgage default insurance premiums at the time of purchase versus financing them with a mortgage. 
  • Identify that a portion of mortgage default insurance premiums may not be financed.
  • Explain maturity or renewal options for a mortgage.
  • Determine how each of these factors may impact the suitability of a mortgage:
    • Purpose of credit or borrowed funds
    • Amount of credit requested / required
    • Ongoing need for borrowing capacity
    • Expected variability of interest rates
    • Cost, including interest and fees
    • Impact on cash flow
    • Payment options (schedule, amounts, options)
    • Expected prepayments
    • Collateral requirements
    • Expected lifetime of collateral (if applicable)
    • Closure requirements / costs
    • Tax impact
  • Evaluate how each of the factors may impact the suitability of a mortgage.
  • Determine how each of these factors may impact the suitability of an open mortgage:
    • Cost, including nominal interest rate
    • Expectation of prepayments
    • Penalties related to plans to sell property
  • Evaluate how each of the factors may impact the suitability of an open mortgage. 
  • Determine how each of these factors may impact the suitability of a closed mortgage:
    • Cost, including nominal interest rate
    • Expectation of prepayments
    • Penalties related to plans to sell property
  • Evaluate how each of the factors may impact the suitability of a closed mortgage. 
  • Determine how each of these factors may impact the suitability of a fixed rate mortgage:
    • Cost, including nominal interest rate
    • Expectation of interest rate changes in the future
    • Comfort with fluctuations in payment and/or amortization
    • Financial capacity to handle fluctuations in cash flow
  • Evaluate how each of the factors may impact the suitability of a fixed rate mortgage.
  • Determine how each of these factors may impact the suitability of a variable rate mortgage:
    • Cost, including nominal interest rate
    • Expectation of future interest-rate changes
    • Comfort with fluctuations in payment and/or amortization
    • Financial capacity to handle fluctuations in cash flow
  • Evaluate how each of the factors may impact the suitability of a variable rate mortgage.
  • Identify the charges that may be associated with breaking and renegotiating a mortgage agreement, such as:
    • Prepayment charges / penalties
    • Administration fees
    • Appraisal fees
    • Reinvestment fees
    • Legal and registration fees to discharge the original mortgage charge and register a new mortgage charge
    • Repayment of benefits received with original mortgage (i.e., cash back)
  • Identify potential methods that may be used to reduce prepayment charges when paying out or discharging a mortgage, such as:
    • Making prepayments up to allowable limits before making final payment
    • Increasing payments up to allowable limits until time of final payment
  • Identify options for paying prepayment charges when breaking a mortgage agreement, such as:
    • Pay in cash
    • Add to new mortgage balance and finance over lifetime of the mortgage
    • Add to mortgage rate and finance over term of the mortgage
  • Identify options available when breaking mortgage agreement in favour of lower interest rates, such as:
    • Pay off entire mortgage and set new mortgage up with current lender at a lower interest rate
    • Pay off entire mortgage and set new mortgage up with different lender at a lower interest rate
    • “Blend and extend” mortgage with current lender 
  • Determine how each of these factors may impact the decision to break a mortgage agreement:
    • Costs
      • Prepayment costs
      • Discharge fees
      • Registration fees for a new mortgage
    • Impact on cash flow
    • Impact on interest cost
      • Over the remaining term of the mortgage
      • Over the amortization of the mortgage
    • Impact on balance of mortgage at end of the mortgage term
    • Impact on amortization of mortgage
    • Expectations for future interest rates
    • Potential to port mortgage to another property
    • Potential for mortgage to be assumed
    • Individual attitudes / preferences
  • Evaluate how each of the factors may impact the decision to break a mortgage agreement.
  • Calculate the impact of breaking a mortgage agreement.
    • On cash flow
    • On Interest cost
      • Over the remaining term of the mortgage
      • Over the amortization of the mortgage
    • On the balance of the mortgage at the end of the mortgage term
    • On the amortization of the mortgage
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