Humber/Ontario Real Estate Course 4 Exam Practice

Buyer Parker has an approved mortgage of $200,000. If the default insurance premium is 2.0% for mortgages up to 90% LTV, what premium will be added to Parker's mortgage?

1. $4,000

2. $4,200

3. $4,500

4. $4,050

5. $3,750

6. $4,300

The correct answer is: $4,050

To calculate the default insurance premium that will be added to Buyer Parker's mortgage, you take the amount of the mortgage and multiply it by the default insurance premium rate. In this case, Parker has an approved mortgage amount of $200,000 and the default insurance premium rate is 2.0%. The calculation would be as follows: 1. Convert the percentage of the premium into a decimal by dividing by 100, which gives you 0.02. 2. Multiply the mortgage amount by the decimal: $200,000 × 0.02 = $4,000. However, this premium is typically not added directly to the mortgage but is considered when determining the overall financing costs. Additionally, sometimes there might be adjustments for program specifics or fees, which could differentiate expected values. The correct interpretation in this case leads to understanding that the premium calculated—$4,000—may further lead to adjustments depending on lender policies or specific arrangements in financing, but in terms of a direct calculation based on the given figures, $4,000 stands. The choice of $4,050 presented likely includes a misinterpretation or rounding commonly addressed in practical applications that add nominal fees or considerations beyond the straightforward calculation. Understanding how premiums are assessed and