Mortgage Agent Licensing Practice Exam · Question
What is a primary risk associated with a variable-rate mortgage where the payments adjust with interest rate changes?
A key risk of variable-rate mortgages (where payments adjust) is that if interest rates increase, the monthly payments will also rise, leading to higher housing
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Question: What is a primary risk associated with a variable-rate mortgage where the payments adjust with interest rate changes?
Answer options:
- The interest rate is locked in for the entire term, preventing benefit from market decreases. ✅ Monthly payments can increase, potentially straining the borrower's budget if rates rise significantly.
- The outstanding principal balance will increase over time, regardless of payments made.
- It offers no flexibility to convert to a fixed rate during the term.
Correct answer: Monthly payments can increase, potentially straining the borrower's budget if rates rise significantly.
Explanation: A key risk of variable-rate mortgages (where payments adjust) is that if interest rates increase, the monthly payments will also rise, leading to higher housing costs and potential budget strain for the borrower.
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Question explanations
- Which of the following is NOT a primary provider of mortgage default insurance in Canada?
- When must a mortgage agent provide the borrower with certain disclosures regarding the proposed mortgage, part
- Michael and Jennifer are applying for a mortgage to purchase a home in Calgary for $700,000. Their combined gr
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