What is the minimum down payment required for a CMHC-insured mortgage on a home priced at $400,000 in Alberta?

Q: What is the correct answer to: What is the minimum down payment required for a CMHC-insured mortgage on a home priced at $400,000 in Alberta?

The correct answer is 5% ($20,000). Option B correctly states the minimum down payment is 5% ($20,000) for a $400,000 property. Under Canadian federal regulations, properties priced up to $500,000 require a minimum 5% down payment for CMHC-insured (high-ratio) mortgages. This is a uniform national rule applying to all provinces including Alberta.

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

The minimum down payment in Canada is 5% for homes priced up to $500,000. CMHC mortgage default insurance is mandatory when the down payment is below 20%, protecting the lender against borrower default. The insurance premium ranges from 2.8% to 4.0% of the mortgage amount depending on the loan-to-value ratio and is typically added to the mortgage balance.

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

Under $500K = 5% minimum down. At $400K, that is $20,000. Below 20% down means mandatory mortgage default insurance from CMHC, Sagen, or Canada Guaranty. For exam calculations on properties under $500K, simply multiply the price by 5% for the minimum down payment. No tiered calculation is needed below the $500K threshold.

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

The 5% minimum applies only up to $500,000. If the property price exceeds $500,000, switch to the tiered calculation. Always check the price before choosing your calculation method.

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

A first-time buyer in Medicine Hat finds a home for $400,000. Their mortgage broker confirms the minimum down payment is $20,000 (5%). With a $380,000 insured mortgage, the CMHC premium of 4.0% ($15,200) is added to the mortgage, making the total insured mortgage $395,200 with monthly payments calculated on this amount.

Question

Mortgage & Real Estate FinanceABEASY

What is the minimum down payment required for a CMHC-insured mortgage on a home priced at $400,000 in Alberta?

Answer Options

A

3% ($12,000)

B

5% ($20,000)

C

10% ($40,000)

D

20% ($80,000)