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Rates in Quebec

Your Guide to Getting the Best Mortgage Rates in Quebec

When you’re looking to find the very best mortgage rates in Quebec, nesto is your one-stop shop. You can always rely on us to help you better understand how to navigate mortgages in any kind of market and provide the very best interest rate upfront.

About Quebec

Covering nearly one-sixth of Canada’s total land area, Quebec is the largest of Canada’s 10 provinces in area and is second only to Ontario in population. Its capital, Quebec City, is the oldest city in Canada. The name ‘Quebec’ was derived from an Algonquian word meaning “where the river narrows,” and welcomes visitors to Quebec City’s impressive view of the majestic St Lawrence River and the pastoral Orleans Island. 

Key facts about Quebec:

• The province’s major metropolis – Montreal – encompassing Montreal Island, Jesus Island to the north and several communities on the south shore of the St Lawrence River, is the second largest city in Canada
• The Chateau Frontenac Hotel holds the Guinness World Record for the most photographed hotel in the world!
• The province produces a lot of maple syrup
• Poutine originated in the province
• The Quebec Winter Carnival Festival – known as Carnaval – is the largest winter festival in the world

Learn About Rates & Mortgages in Quebec 

Welcome to our Frequently-Asked Questions (FAQ) section, where we answer the most popular questions our nesto advisors receive on a daily basis across Quebec, designed to help you make informed mortgage decisions every time you need a new mortgage or to renew/refinance an existing one.

About the Quebec Housing Market

Throughout 2021 and into 2022, most regions of Quebec have been considered hot markets thanks to a low level of active listings, a high number of property sales and an unprecedented increase in sale prices. 

Since 2020, low interest rate costs on mortgages coupled with low property supply and high demand has led to an increase of prices due to bidding wars. On average, Quebec’s sales price of single-family homes rose 24% to $365,000 in 2021 and condominiums increased by 21% to $328,000.

First-Time Home Buyer Programs in Quebec

There are several first-time home buyer incentives and programs available in Quebec that were designed specifically to help lighten the financial burden for first-time home buyers. These programs will offset some home buying costs as well as help fund your down payment, which is often one of the biggest hurdles involved in buying your first home. See: First-Time Home Buyer Programs in Canada

The Montreal Home Ownership Program was introduced in 2018 to provide financial assistance via lump-sum payments to first-time home buyers. If the household has children, a refund for up to 100% of the land transfer tax (known as welcome tax in Quebec) may be granted. If the property was bought prior to 2018, families with at least one child are still eligible to receive the refund if the property includes a minimum of three bedrooms. The amount of the lump-sum payment depends on the purchase price of the property.

What are the Different Types of Mortgages?

Open VS Closed Mortgage

With an open mortgage, you’re able to prepay any amount of your mortgage at any time without facing a prepayment penalty. The compromise for having an open mortgage is that interest rates are higher to make up for the flexibility of being able to pay it off at any time.

With a closed mortgage, on the other hand, the interest rate is more attractive than a closed mortgage because you’re limited by how much extra you can pay towards your mortgage each year. So, the compromise here is that you’ll face a prepayment limit. This means that you’re only permitted to pay a certain percentage of your original or current balance per year – often 15%, on average, but this varies between lenders. If you have the choice, be sure to always opt for the original balance prepayment option as it will enable you to pay off more in a year. And if you choose to pay more than your annual limit, you’ll receive a prepayment penalty. It’s important, therefore, to be aware of your limits and stay within them.

Fixed Mortgages

Fixed-rate mortgages make up 70% of all mortgages in Canada. A fixed-rate mortgage keeps your interest rate steady over the term of your mortgage (1-10 years). There’s no doubt that the five-year fixed-rate mortgage is the most common choice selected by Canadian homeowners. But, this isn’t the best option for everyone, regardless of its popularity. Fixed-rate mortgages appeal to homebuyers who are looking for a dependable payment schedule, manage a tight monthly budget or are generally more conservative. For instance, Millennials with large mortgages relative to their income may be better off opting for the peace of mind provided by a fixed rate and payments.

Variable interest rate mortgages 

A variable interest rate can increase and decrease during your term. If you choose a variable interest rate, your rate may be lower than if you selected a fixed rate.

There are two types of variable mortgages: a) Variable rates with Fixed payments and b) Variable rates with Adjustable payments

Fixed payments with a variable interest rate

In general, under this option, the payment remains fixed over time despite variations of the interest rate.

If the interest rate goes up, more of your payment goes towards the interest, and less to the principal.

If the interest rate goes down, more of your payment goes towards to the principal. This means, you pay off your mortgage faster.

That being said, if the market interest rates increase to a certain percentage or trigger point, your lender may increase your payments. This payment increase will make sure that you pay off your mortgage by the end of the amortization period. The trigger point is listed in your mortgage contract.

Adjustable payments with a variable interest rate

With adjustable payments, the amount of your payment changes if the interest rate changes. A set amount of each payment applies to the principal. The interest portion changes as the interest rates change. You’ll know in advance how much of the principal you’ll have paid at the end of the term.

Land transfer tax in Quebec

Land transfer tax rates – known as welcome tax in Quebec – are calculated based on the purchase price of your property, with a marginal tax rate range of 0.5%-1.5%. In Montreal, municipal land transfer tax is also required (see details in Montreal section below).

Quebec

Home Purchase Price	Marginal Tax Rate
First $50,000	0.5%
$50,001-$250,000	1.0%
$250,001+	1.5%

Montreal

Home Purchase Price	Marginal Tax Rate
First $50,000	0.5%
$50,001-$250,000	1.0%
$250,001 – $500,000	1.5%
$500,001-$999,999	2.0%
$1,000,000+	2.5%

What Affects My Mortgage Rate in Quebec? 

Factors such as credit score and income play a big part in qualifying for the lowest interest rate in Quebec. The riskier a borrower appears, the higher the interest rate can be. Rate is definitely not the most important aspect of a mortgage, however, as many rock-bottom rates often come from no-frills mortgage products. In other words, even if a borrower qualifies for the lowest rate, they must often give up other features such as prepayments and porting privileges when opting for the lowest-rate product.

There are many other ways to save money over the mortgage term instead of taking the lowest rate, including rounding up mortgage payments or making lumpsum payments when bonuses, etc are received throughout the year. It’s important, however, not to exceed the allowable limit on annual extra payments with your lender.

Down Payment

The size of your down payment will determine whether you must also pay mortgage default insurance in addition to your regular mortgage payments. Mortgage default insurance is required any time you make a down payment that’s less than 20% of the property’s value.

Amortization Period

If you select a longer amortization period (the maximum is 25 years on mortgages with less than a 20% down payment and 30 years on mortgages with down payments of 20% or higher), your individual mortgage payment will be lower because they’re spread out over a longer period of time. Longer amortizations can come equipped with higher interest rates. You’ll also pay more interest the longer you take to pay off your mortgage.

Property Usage

If you’re buying a home that you personally intend to live in, this is considered your primary residence and is known as owner occupied. If you’re buying an investment property that you intend to rent to others, you’ll pay higher interest rates than on your primary residence. The logic behind this is that people will pay the mortgage on their primary residence before any rental properties. As such, lenders build added risk into the rates for rental properties.

Mortgage Type

The type of mortgage you select – such as variable vs fixed and open vs closed – will play a role in your mortgage rate. Each selection is a personal choice based on a number of factors.

When looking at open vs closed mortgages, for instance, it’s important to note that open mortgages are priced higher because of the flexibility they offer to pay the mortgage off at any time without facing a penalty.

And while variable mortgages have proven to be more cost effective over time than fixed mortgages, some people prefer the certainty of having the same payment throughout the mortgage term as is the case with fixed mortgages.

Your Credit Score

The ideal candidate for a traditional mortgage lender has a credit score that’s 680 and above. The higher the score is above 700 the better – with a maximum score of 900 possible – as borrowers will qualify for the lowest rates. There are options available for people with lower scores as well, but you can expect rates to be higher and terms to be shorter in these circumstances. nesto has strict lending guidelines that require a minimum credit score and no recent missed payments.

How nesto Works

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