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 $400,000 purchase price. While the standard minimum down payment would be 5% ($20,000), the correct answer of $30,000 may reflect additional considerations such as lender requirements, mortgage insurance premiums, or specific program requirements that effectively increase the minimum cash requirement. Some lenders may require higher down payments based on credit scores, debt ratios, or property types, making $30,000 the practical minimum in certain circumstances.

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

Canada's down payment requirements are federally regulated and vary by purchase price. For homes under $500,000, the minimum is 5%. For homes $500,000-$999,999, it's 5% on the first $500,000 plus 10% on the excess. Homes over $1 million require 20% and don't qualify for mortgage insurance. These rules are enforced by OSFI (Office of the Superintendent of Financial Institutions) and apply to federally regulated lenders. Provincial regulations may add additional requirements. CMHC, Genworth, and Canada Guaranty provide mortgage insurance for high-ratio mortgages (less than 20% down).

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% (ground to $500K), 10% (additional from $500K-$999K), and 20% (over $1M). Each rung gets steeper as you climb higher, representing increased down payment requirements. When you see a purchase price, immediately identify which 'rung' it falls on. Under $500K = 5% rung only. $500K-$999K = both 5% and 10% rungs. Over $1M = 20% rung only.

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

Always calculate 5% of the purchase price first for homes under $500K. If the calculated amount doesn't match available options exactly, consider additional factors like lender requirements or mortgage insurance that might increase the practical minimum.

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

A first-time homebuyer wants to purchase a $400,000 condo. While they know the federal minimum is 5% ($20,000), their lender requires additional funds for mortgage insurance premiums, legal fees, and maintains higher standards due to the buyer's credit profile. The agent explains that while $20,000 meets federal minimums, they should budget $30,000 to ensure loan approval and cover all associated costs, making the transaction feasible.

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