A first-time homebuyer, Emily Chen, is purchasing a detached home in Vancouver for $950,000. She has a down payment of $80,000. Which of the following is true regarding mortgage default insurance for Emily's purchase?

Question: A first-time homebuyer, Emily Chen, is purchasing a detached home in Vancouver for $950,000. She has a down payment of $80,000. Which of the following is true regarding mortgage default insurance for Emily's purchase?

Answer options: ✅ Emily's down payment is insufficient for a conventional mortgage; mortgage default insurance will be mandatory.

• With a down payment of $80,000, Emily qualifies for a conventional mortgage without needing insurance.
• Mortgage default insurance is optional for Emily, as her purchase price is under $1,000,000.
• Emily's down payment of $80,000 on a $950,000 home means she has a 10% down payment, making it a low-ratio mortgage.

Correct answer: Emily's down payment is insufficient for a conventional mortgage; mortgage default insurance will be mandatory.

Explanation: For properties up to $500,000, the minimum down payment is 5%. For properties between $500,000 and $999,999, 5% is required on the first $500,000 and 10% on the portion above $500,000. Emily needs $500,000 * 0.05 + ($950,000-$500,000) * 0.10 = $25,000 + $45,000 = $70,000. Since she has $80,000, her down payment is sufficient, but it is less than 20% of the purchase price, making mortgage default insurance mandatory, as per CMHC/Sagen/Canada Guaranty high-ratio rules.