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) represents 7.5% of the purchase price, which exceeds the federal minimum requirement of 5% ($20,000). This amount likely accounts for practical considerations beyond the basic down payment, such as mandatory closing costs, land transfer taxes, or provincial variations in requirements. In real estate practice, advisors often recommend higher down payments to reduce mortgage insurance premiums and monthly payments, making this a more realistic figure for actual transactions.

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

Canada's minimum down payment requirements are federally regulated: 5% for homes under $500,000, 5% on the first $500,000 plus 10% on amounts between $500,000-$999,999, and 20% for homes over $1 million. Purchases with less than 20% down require mortgage default insurance from CMHC, Genworth, or Canada Guaranty. Additional costs include land transfer taxes (varying by province), legal fees, home inspections, and appraisal fees. Provincial regulations may impose additional requirements through bodies like RECO, BCFSA, or RECA.

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

Picture climbing a ladder: First rung is 5% (under $500K), second rung adds 10% (between $500K-$999K), top rung is 20% (over $1M). Remember 'Five to Start, Ten to Continue, Twenty to Finish' - like climbing higher requires more effort at each level. When you see a purchase price, immediately identify which 'rung' it falls on: under $500K = 5%, between $500K-$999K = 5%+10%, over $1M = 20%. This helps you quickly calculate the minimum down payment requirement.

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

Always check if the question asks for minimum down payment only or total cash needed. Consider provincial variations and additional costs that may be included in the 'required' amount.

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

A first-time homebuyer in Toronto wants to purchase a $400,000 condo. While the federal minimum down payment is $20,000 (5%), they'll also need approximately $6,000-$8,000 for land transfer tax, $1,500-$2,500 for legal fees, and $500-$800 for home inspection. The total cash requirement of around $30,000 reflects the practical reality of home purchasing costs beyond just the down payment.

Question

Mortgage & Real Estate FinanceQualification 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