An investor buys a $2 million rental property with a 25% down payment. What is the loan-to-value ratio, and how would the mortgage be classified?
Correct Answer
D) 75% LTV; a conventional mortgage
The down payment is 25% of $2,000,000 = $500,000, so the mortgage is $1,500,000 and the loan-to-value ratio is $1,500,000 ÷ $2,000,000 = 75%. With at least 20% down, mortgage loan insurance is typically not required, so the loan is a conventional mortgage rather than a high-ratio insured one.
Why This Is the Correct Answer
The loan is $1,500,000 on a $2,000,000 price, a 75% LTV. Because the down payment is at least 20%, the mortgage is conventional rather than high-ratio.
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An investor is financing a $2,000,000 purchase with 25% down through a private lender that is not federally regulated. OSFI's minimum qualifying rate (the stress test) for uninsured mortgages is a requirement on which lenders?
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