Sarah, a first-time homebuyer in Edmonton, is purchasing a detached home for $400,000. She has saved a down payment of $30,000. What type of mortgage will Sarah require, and what is the primary reason for this classification?

Question: Sarah, a first-time homebuyer in Edmonton, is purchasing a detached home for $400,000. She has saved a down payment of $30,000. What type of mortgage will Sarah require, and what is the primary reason for this classification?

Answer options:

• Conventional mortgage, because her down payment is less than 20% of the purchase price. ✅ High-ratio mortgage, because her loan-to-value ratio exceeds 80%.
• Conventional mortgage, as the property value is below $1,000,000.
• High-ratio mortgage, because she is a first-time homebuyer.

Correct answer: High-ratio mortgage, because her loan-to-value ratio exceeds 80%.

Explanation: A high-ratio mortgage is required when the down payment is less than 20% of the property's purchase price, meaning the loan-to-value ratio exceeds 80%. This type of mortgage requires mortgage loan insurance from providers like CMHC.