During a mortgage application process, a client, Mr. Sharma, asks his mortgage agent about the pre-payment penalties for a specific variable-rate mortgage product. The agent advises Mr. Sharma that variable-rate mortgages typically have 'minimal' penalties but does not provide the specific calculation or range of potential penalties. Is this adequate disclosure?

Question: During a mortgage application process, a client, Mr. Sharma, asks his mortgage agent about the pre-payment penalties for a specific variable-rate mortgage product. The agent advises Mr. Sharma that variable-rate mortgages typically have 'minimal' penalties but does not provide the specific calculation or range of potential penalties. Is this adequate disclosure?

Answer options: ✅ No, the agent must provide specific, detailed information about any pre-payment penalties that could apply to the recommended product.

• Yes, 'minimal' is a sufficient description for variable-rate penalties, which are often lower than fixed rates.
• No, but only if Mr. Sharma specifically requested the exact dollar amount of the penalty.
• Yes, as long as the information is readily available on the lender's website, the agent is not obligated to detail it.

Correct answer: No, the agent must provide specific, detailed information about any pre-payment penalties that could apply to the recommended product.

Explanation: Mortgage agents are required to provide clear and comprehensive disclosure of all material facts, including specific details of pre-payment penalties, in a form that the borrower can understand, allowing them to make an informed decision (e.g., FCAC Guidance, O. Reg. 187/08, s. 31(2)(h)).