Humber/Ontario Real Estate Course 3 Exam Practice

In a mortgage financing conditional clause, when is it appropriate to extend the conditional timeframe?

1. When the offer is unconditional

2. In a seller's market

3. For a high ratio mortgage

4. When the buyer demands it

5. For all mortgages under $500,000

6. When the seller prefers not to bind the property

The correct answer is: For a high ratio mortgage

A mortgage financing conditional clause is an important aspect of a real estate transaction, allowing a buyer to obtain financing before fully committing to the purchase. The appropriate contextual understanding of extending the conditional timeframe highlights how the nature of the mortgage can impact the buyer's needs and requirements. In the case of a high ratio mortgage, which is a mortgage where the loan amount is greater relative to the property value (typically exceeding 80% of the property's value), the lending process may involve more extensive scrutiny and approval procedures. This increased complexity and length in obtaining a high ratio mortgage can render the original conditional timeframe insufficient. As a result, lenders may require additional time to assess the buyer’s financial situation and ability to repay, leading to the necessity for an extension of the conditional timeframe. This context explains why extending the timeframe in the case of a high ratio mortgage is appropriate to accommodate the thorough evaluation needed by lenders, allowing buyers to secure the necessary financial backing without the pressure of an unrealistically short deadline. In contrast, the other options do not necessarily relate to the specific complexities associated with mortgage financing.