An Alberta buyer wants to purchase a property for $600,000 with a down payment of $50,000. How is the minimum down payment calculated for this price?

Q: What is the correct answer to: An Alberta buyer wants to purchase a property for $600,000 with a down payment of $50,000. How is the minimum down payment calculated for this price?

The correct answer is 5% of the first $500,000 ($25,000) plus 10% of the remaining $100,000 ($10,000) = $35,000. Option B correctly applies the federal tiered down payment formula. For a $600,000 property: 5% of $500,000 = $25,000 plus 10% of $100,000 = $10,000, totaling $35,000. This two-tier structure applies to all Canadian properties in the $500,000-$999,999 range under federal mortgage insurance regulations.

Q: What background knowledge is needed for this Mortgage & Real Estate Finance question?

Canada's minimum down payment rules are tiered: 5% for the first $500,000, 10% for the portion between $500,000 and $999,999, and 20% for properties at $1,000,000 or above. Properties above $1 million are ineligible for CMHC insurance. These federal rules apply uniformly across all provinces including Alberta, regardless of local market conditions.

Q: What is a good way to remember the answer to this Mortgage & Real Estate Finance question?

5% up to $500K, 10% on $500K-$999K portion, 20% at $1M+. Think of it as climbing stairs: the higher the price, the steeper the down payment percentage. On exam calculations, always split the purchase price at the $500K threshold. Calculate each portion separately, then add them together for the total minimum down payment.

Q: What exam tip applies to this Mortgage & Real Estate Finance question?

Watch for trap answers using a flat percentage on the full price. The tiered calculation always requires splitting at $500,000. Practice the math so you can calculate quickly on exam day.

Q: How does this Mortgage & Real Estate Finance concept apply in real world practice?

A Red Deer buyer finds a home listed at $650,000. Their agent calculates the minimum down payment: 5% of $500,000 ($25,000) plus 10% of $150,000 ($15,000) = $40,000 minimum. The buyer has $45,000 saved, which exceeds the minimum but still requires CMHC mortgage default insurance since it is below 20%.

Question

Mortgage & Real Estate FinanceABMEDIUM

An Alberta buyer wants to purchase a property for $600,000 with a down payment of $50,000. How is the minimum down payment calculated for this price?

Answer Options

A

5% of the full $600,000 = $30,000

B

5% of the first $500,000 ($25,000) plus 10% of the remaining $100,000 ($10,000) = $35,000

C

10% of the full $600,000 = $60,000

D

20% of $600,000 = $120,000