Humber/Ontario Real Estate Course 2 Exam Practice

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Prepare for the Ontario Real Estate Exam with our comprehensive Humber Course 2 Exam Practice quiz. Engage with multiple choice questions and detailed explanations, designed to help you excel.

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What accurately describes mortgage default insurance?

  1. Allows mortgage deals with a minimum 10% down payment.

  2. Protects mortgage borrowers in the event of serious illness.

  3. Known as creditor life insurance.

  4. Available from private insurers and government corporation.

The correct answer is: Available from private insurers and government corporation.

Mortgage default insurance is a type of insurance that protects the lender in case the borrower defaults on the mortgage. This insurance is required by lenders for high-ratio mortgages, where the down payment is less than 20% of the purchase price. Option A is incorrect because mortgage default insurance is typically required for down payments less than 20%, not just a minimum 10% down payment. Option B is incorrect because mortgage default insurance does not protect the borrower in the event of serious illness; it protects the lender. Option C is incorrect because creditor life insurance is a different type of insurance that pays off a specific debt, while mortgage default insurance protects the lender in case of default. The correct answer is D because mortgage default insurance is available from both private insurers and a government corporation in Canada, such as the Canada Mortgage and Housing Corporation (CMHC).