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Your Guide to Getting the Best Mortgage Rates in Montreal

Montreal has one of the most affordable urban housing markets in the country, and some of the lowest mortgage rates due to its high concentration of mortgage brokers in Quebec, which drives price competition among all lenders.

While Quebec has a slightly smaller roster of mortgage lenders than most Canadian provinces, the big banks and mortgage financing companies such as MCAP and First National keep the rate market as competitive as the rest of the country. There are a number of Canadian mortgage companies that are testing their products in Quebec on a case by case basis (ex: Alterna Savings) and a few others on the brink of launching their full suite of products province-wide (coming soon: Equitable Bank, Street Capital, CMLS Financial).

When shopping for the best mortgage rates in Quebec, location is important. The closer the property is to a major city (ex: Montreal or Quebec City), the more lenders you have available to choose from and in turn, more competitive rates. 

That competition means it’s important to shop around, though, to make sure you’re getting the best rates available to you.

Of course, your own financial situation plays a direct role in the rates you’ll pay. The higher your credit score, the more competitive your rate quotes will be. Lenders also look at your debt-to-income ratio to make sure you’ll be able to make your monthly payments for the duration of the loan. This ratio is the amount of debt you hold to various creditors compared to the income you bring in. The lower the number, the better.

About Montreal

Montreal is North America’s ninth largest city and is home to the world’s second largest French-speaking population. Home to just under 2 million, Montreal has a widely diverse population with just under 50% being of European origin and over 30% of a visible minority.

Clashing with expected continued population growth trends across Canada, The Quebec Government hopes to reduce foreign immigration to 20%. This, along with evident growth in the city’s tech and visual effects industries, is projected to have a positive impact on Montreal’s local unemployment rate (6.1% in 2018, and a projected 5.5% for 2019).

Learn About Rates And Mortgages in Montreal

A home is an important purchase. Knowing as much as possible from the start will help you get the best deal. Here are some commonly asked questions about getting a mortgage in Montreal.

Why compare Montreal mortgage rates on nesto?

There has never been more lending opportunities available to homebuyers.You can choose from large lenders, small banks, credit unions, and online lenders. Being in Montreal also gives you access to a large number of local mortgage lenders, and those lenders compete with each other for your business.

But comparing rates takes time. You can get a feel for the interest rates various mortgage lenders are offering, but often you don’t know the rate you’ll be quoted until you can apply. Each prequalification takes extra time, which means that chances are, you’ll settle for a rate after checking with just a few lenders.

Nesto has a rate-comparison tool that lets you view best rates at a glance. This ensures that you’ll be fully aware of the rates before you apply. The best thing about nesto, though, is that you don’t have to go to multiple lenders to look at rates. It’s in one spot!

If you decide to proceed, you can go through the remainder of the application process directly on the platform. This means uploading documents and scheduling closing, all in one place.

Are Montreal mortgage rates higher than other cities?

Montreal is a bustling city packed with a variety of housing options.

You can choose to live in a condo downtown or a house in the suburbs. But being the second-largest city in Canada can push housing prices up.

Finding a good deal on a mortgage can help counteract that higher cost. The best thing about living in a big city is that there’s plenty of competition for your lending business. This can drive Montreal’s mortgage rates down. Overall, the cost of living in Montreal is lower than Vancouver and Toronto, but you will pay more than other areas. This means you’ll get the benefits of competition without the higher cost of living of pricier areas.

If you’re moving to Montreal and switching jobs, it’s also important to look at your income. Montreal’s thriving industry means you can take your pick of employers. This could potentially drive your income up, allowing you to qualify for a lower interest rate.

Should I get a fixed-rate or variable-rate mortgage in Montreal?

You can save significant money in interest by choosing a variable-rate mortgage.

Five-year variable rates are available for as low as 1.25% APR in Montreal, and this can save you money over the course of your loan.

The problem with a variable-rate mortgage is that the rate fluctuates over time. You could secure one at 1.25%, only to find yourself paying 1.5% or more over the course of those five years. This, due to prime rate fluctuation.

However, the best thing about a variable-rate mortgage is that you can choose to lock your rate in at any time, turning that lower rate into a fixed-rate mortgage.

A fixed-rate mortgage, on the other hand, gives you a fixed, predictable rate that you’ll pay for the duration of your mortgage. That means as interest rates rise, your mortgage won’t be affected. This can come in handy if you apply for the loan at a time when Montreal’s interest rates are historically low, as they were during the pandemic.

Still, historically speaking, you’re better off going with a variable rate. But some simply aren’t comfortable with the unpredictability of a variable interest rate. By locking in at a fixed rate, you may find that you sleep a little easier at night, knowing that whatever happens with interest rates, you’ll pay the same amount.

But there’s a risk that comes with a fixed-rate mortgage. If, for some reason, you’re unable to honor the terms of your loan, you’ll face a penalty called the interest rate differential. This penalty will apply for the first five years after you sign your mortgage when the current interest rate differs. If there’s a risk that you might move within those first five years or suffer a sudden drastic change in income, a variable-rate mortgage might be better for you.

About the Montreal Housing Market

Montreal’s housing market has seen a significant boom over the past couple of years, with the cost of a single-family home rising +59% since 2017. As the nation sees the pandemic wane, experts expect prices to moderate as demand starts to cool.
But despite what’s happening with the pandemic, Montreal still suffers from a supply shortage. That will continue to push prices up, although likely only a small amount over the coming year. Even an increase of 1%, as some predict, might be a big deal to homebuyers who would prefer to pay $500,000 for a home rather than $505,000.

One thing that could affect home sales is the ability of homebuyers to pay over asking price for a home. The supply shortage has led many Montreal sellers to ask more than a property is worth, often even seeing bidding wars for homes in desirable areas of the city. Rising interest rates, though, could reduce the amount of money homebuyers can reasonably afford to borrow. That will potentially limit the number of buyers at those higher price points.

Montreal Closing Costs

Interest isn’t the only extra cost you’ll face when borrowing money to buy a home in Montreal. The biggest cost to you at closing will be the down payment. In fact, unless you have the minimum available for a down payment in the first place, you probably won’t be able to buy a home. This amount ranges from 5% to 20%, depending on the value of the house you’re buying.
In addition to your down payment, there will be closing costs, due when you sign the final paperwork to finalize your home loan. Financing these costs typically isn’t an option, so you’ll need to have the money on hand. Here are some typical closing costs Montreal lenders charge, although this can vary by lender and the amount of the loan you’re taking.

Type of costRate rangesEstimated cost (based on $500,000 home)
Realtor commissions*3% to 7% of purchase price$15,000 to $35,000
Home inspection feeFlat rate$500
Land transfer tax1.5%$7,500
Legal feesFlat rate$500
Title disbursementFlat rate$100-$300

*Usually paid by seller

Assuming the seller pays the full real estate agent commission, you’ll be on the hook for between $8,600 and $8,800 at closing, in addition to your down payment. The lender also usually requires an appraisal, but often that is an expense the lender handles. If not, this could add $250 to $350 to that total.

Montreal first-time homebuyer rebates

For first-time homebuyers, there are some rebates that can help offset your home buying expenses. These rebates and credits may give you access to the money you need to buy a house or simply help with the ongoing costs of homeownership.

  • RRSP Home Buyer’s Plan: If you participate in a registered retirement savings plan, you may be eligible to withdraw funds from that plan to buy or build a home. The limit is $35,000 on homes located within Canada. 
  • First-Time Home Buyer’s Tax Credit: When you buy your first home in Canada, you’ll be eligible for a one-time tax credit of $5,000. The home must become your main residence within a year of purchase to qualify.
  • GST/HST Credit: Homeowners who qualify as low to moderate income may be eligible for a quarterly payment to offset the goods and services tax Canadian residents pay. You’ll be automatically qualified for this payment when you file your taxes each year.

Montreal Mortgage Brokers

With over 2,000+ mortgage products available, 10+ lenders to work with and 800 licensed mortgage professionals in Quebec alone, it’s certain that home-buyers’ are overwhelmed with options.

Looking to invest in Montreal? Let us help you navigate the Montreal market and provide you with a better understanding of what mortgage rates you have access to.

How to Apply for a Mortgage in Montréal

The first step to take once you’ve decided to buy a home is to get preapproved. This preapproval process will give you a good idea of how much money a lender will let you borrow. Using this information, you can approach real estate agents and start home shopping. You can get prequalified without it affecting your credit, but once you’ve chosen a lender for preapproval, that lender will run an official credit check.

Meet with a mortgage expert

It’s easier than ever to initiate the mortgage process. You can visit a local lender in person, of course, but today’s lenders will also often work by video chat and phone. These early meetings are a great chance to ask any questions you have and make sure you’re getting the best mortgage to meet your unique situation.

Acquire all necessary documents

Documentation is an important part of the loan application process. For preapproval, you’ll typically need at least one recent pay stub to demonstrate your income, assessment notices for the past two years of income if you’re self-employed, and proof of financial soundness. In the latter case, you’ll be asked to show that you can afford the necessary down payment.

Apply for mortgage financing

The best thing about preapproval is that you’ll already have a start on your mortgage application once you find a home. After placing a contract on a house, you’ll progress to the full application process, where the lender asks for any further documentation necessary to put your loan through. There will be a “closing date” on your contract, and your lender will work with you to ensure your loan is ready to be finalized on that date.

Sign & finalize your mortgage

Closing day is an exciting time, but it’s also the date you’ll need to be prepared to transfer the funds to your lender. Your lender will then make sure your closing attorney has the full payment price of the house to transfer to the seller. You’ll typically be directed to a location to meet with your real estate agent and a representative from the mortgage lender to sign everything. Once both you and the seller have signed all the documentation, you’ll be ready to move in.

What Affects My Mortgage Rate in Montreal? 

Factors such as credit score and income play a big part in qualifying for the lowest interest rate in Montreal. 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.

How nesto Works

We offer all the help of a mortgage broker, without the commission. Simply put, our salaried mortgage advisors are rewarded based on your satisfaction. We’re here to help you reach your goal and guide you through the complicated world of home financing. #yesyoucan #empowermentisthenewsexy

Every mortgage professional knows the market’s best rates every time they check their email. Only a few of them will give you that rate without making you work for it. nesto’s here to change the industry for this very reason. You always get the best rate upfront with nesto.