Ontario Real Estate Licensing Exam Practice · Question
What is the primary purpose of a down payment when securing a mortgage?
A down payment reduces the total amount of money the borrower needs to finance, thereby decreasing the loan amount and the overall risk for both the lender and
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Question: What is the primary purpose of a down payment when securing a mortgage?
Answer options:
- To cover legal fees and closing costs ✅ To reduce the loan amount and the borrower's financial risk
- To pay for property renovations before moving in
- To purchase mortgage default insurance
Correct answer: To reduce the loan amount and the borrower's financial risk
Explanation: A down payment reduces the total amount of money the borrower needs to finance, thereby decreasing the loan amount and the overall risk for both the lender and the borrower. It also demonstrates the borrower's vested interest in the property.
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