What is the minimum down payment required for a home purchase of $400,000 in Canada?

Q: What is the correct answer to: What is the minimum down payment required for a home purchase of $400,000 in Canada?

The correct answer is $30,000. Option C ($30,000) is incorrect based on standard Canadian mortgage regulations. For a $400,000 home purchase, the minimum down payment should be 5% of the purchase price, which equals $20,000, not $30,000. The 7.5% calculation that would result in $30,000 doesn't align with federal mortgage insurance requirements or conventional lending standards in Canada.

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

Canadian minimum down payment requirements are federally regulated. For homes under $500,000, the minimum is 5% of the purchase price. For homes $500,000-$999,999, it's 5% on the first $500,000 plus 10% on the remainder. For homes over $1 million, 20% is required. These rules are enforced through mortgage loan insurance requirements (CMHC, Genworth, Canada Guaranty). Properties requiring less than 20% down must obtain mortgage insurance, adding to monthly costs. Provincial regulations may impose additional requirements, and lenders may have stricter internal policies.

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

Picture climbing a ladder with three rungs: 5% (under $500K), 10% (additional amount $500K-$999K), and 20% (over $1M). The ladder gets steeper as you climb higher, just like down payment requirements increase with home prices. When you see a purchase price, immediately identify which rung of the ladder it falls on. Under $500K = 5% only. Between $500K-$999K = 5% + 10% calculation. Over $1M = 20% flat rate.

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

Always calculate 5% first for any home under $500,000. Double-check your math: $400,000 × 0.05 = $20,000. Don't overthink - the basic 5% rule applies to most exam scenarios.

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

A first-time homebuyer couple approaches you about purchasing a $400,000 townhouse. They have $25,000 saved and wonder if it's enough. You explain they need minimum $20,000 (5%) plus closing costs, land transfer taxes, and moving expenses. Their $25,000 provides a small buffer, but you recommend budgeting additional funds for unexpected costs and ensuring they qualify for mortgage loan insurance since they're putting down less than 20%.

Question

Mortgage & Real Estate FinanceDown Payment RequirementsEASY

What is the minimum down payment required for a home purchase of $400,000 in Canada?

Answer Options

A

$20,000

B

$25,000

C

$30,000

D

$35,000