Humber/Ontario Real Estate Course 2 Exam Practice

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Prepare for the Humber/Ontario Real Estate Course 2 Exam with comprehensive quizzes that include flashcards and multiple-choice questions. Enhance your knowledge and confidence in real estate concepts to excel in the examination!

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Which type of mortgage payment arrangement poses the greatest risk to the lender?

  1. 10-year amortized mortgage

  2. Interest-accruing mortgage

  3. Interest-only mortgage, with quarterly interest payments

  4. Interest plus specified principal mortgage

The correct answer is: Interest-accruing mortgage

An interest-accruing mortgage poses the greatest risk to the lender because in this type of arrangement, the borrower does not make regular payments of interest and principal. Instead, the interest is added to the principal balance, increasing the overall amount owed over time. This means that the lender is not receiving any regular payments towards reducing the outstanding loan amount, which increases the lender's risk of not being fully repaid. In contrast, the other options provide some form of regular payment towards reducing both the interest and principal balance, thereby reducing the lender's risk.