How to Buy a House in Montreal in 2024
What You Should Know
- Buying a house in Montreal includes plenty of preparation work, such as improving your credit score, reducing debt, and doing your research.
- Scout out neighbourhoods based on location, amenities, and price.
- While home prices in Montreal are more affordable than Toronto and Vancouver, you’ll still need to come up with a sizeable down payment.
- Work with a real estate agent experienced in the Montreal real estate market, as they’ll guide you through the homebuying process with no direct cost to you.
Montreal has something for everyone who wants to call it home, from its vibrant culture to its plentiful green spaces. The city’s excellent public transportation system, extensive network of bike lanes and pedestrian-friendly streets make it easy to get around. And its top-ranking educational institutions, from universities such as McGill, Concordia, and the University of Montreal, to a variety of CEGEPs, offer many postsecondary education options.
More and more Canadians are looking to buy a home in Montreal, enticed by affordable home prices and rent as well as the lowest cost of living in Canada out of the major cities. For those looking to move to Montreal, this 10-step guide will help you understand what you need to know about buying a home in Montreal, Quebec.
It might come as a surprise to some that home prices in Montreal are quite affordable when compared to other urban centers, especially considering that Montreal is Canada’s second biggest city. Canada’s biggest and third biggest cities, Toronto and Vancouver, are well known for their expensive real estate markets, but Montreal offers a much more affordable option for those looking to purchase a home.
Although buying in Montreal is far cheaper than other major cities, it's still a significant expense to account for. That’s why it’s important to research the local market, understand the different neighborhoods in Montreal, and figure out which ones best fit your needs and budget.
The first step to buying a home in Montreal is doing your research about home prices. This will give you an idea of what’s available and how much you should expect to pay. Can you afford to buy a house in Montreal? Let’s take a look to see what income and down payment you would need in order to afford a home in Montreal.
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10 Steps to Buying a Home in Montreal
Step 1: Saving for a Down Payment
While Montreal homes are affordable, you’ll still need to have tens of thousands of dollars saved up for a down payment. Generally, the more you’re able to save up for a down payment, the less money you’ll have to borrow as a mortgage. You’ll want to start saving money as soon as possible, even if you’re not looking to buy a home anytime soon.
The best way to start saving for a down payment is by creating a budget and tracking your expenses. This will help you figure out how much money you can set aside each month in order to reach your savings goal, or how much you need to reduce your spending to have enough money to save up.
The minimum down payment to buy a home in Montreal is just like the rest of Quebec and Canada: a minimum of 5% of the home’s purchase price if it’s under $500,000 or a minimum of 20% of the home’s purchase price if it’s $1 million or over.
For homes between that price range, the minimum down payment in Montreal is 5% of the portion under $500,000 and 10% on the portion over $500,000.
CMHC Insurance 💡
There’s an additional cost to buy a home in Montreal if you were to make a down payment of less than 20%: CMHC insurance or a similar mortgage default insurance premium. This would cost you between 2.8% to 4.0% of the total amount of your mortgage.
The First Home Savings Account (FHSA) can be a good way to save money for a down payment, as it combines the tax benefits of an RRSP and a TFSA. This gives you a tax deduction when you contribute and lets you withdraw the money tax-free in order to buy a home.
Those that have maxed out their FHSA contributions may want to put their additional savings into their TFSA or RRSP. One feature of the RRSP is the Home Buyers' Plan, which allows for a withdrawal to purchase your first home. However, you’ll need to repay the withdrawn amount back into your RRSP in the future.
Down Payment Assistance in Montreal💡
There are down payment assistance programs (DPAPs) available to homebuyers in Montreal. This includes first time home buyer incentives as well as government and municipal funding options.
The federal government’s First-Time Home Buyers Incentive (FTHBI) provides up to 5% to 10% of the home’s purchase price as an additional down payment. For Montreal homebuyers, your annual income needs to be less than $120,000 in order to qualify. You'll also won't be able to borrow more than 4 times your income. This means that the maximum mortgage you can have and still be eligible for the First-Time Home Buyer Incentive in Montreal is $480,000. That's slightly less than the average price of a home in Montreal.
The City of Montreal's Home Ownership Program provides financial assistance to first-time home buyers or those with children, to purchase a new or existing home in Montreal. For new homes, you could receive between $5,000 up to $22,500, based on the location, if you have children, and the property's environmental certification. For existing homes, you could receive a rebate on the home's real estate transfer tax (welcome tax), from $5,000 up to $7,000.
Step 2: Build Up Your Credit Score and Income
When it’s time to apply for a mortgage in Montreal, something that lenders will look at closely are your financials. This includes things like your credit history, income, and existing debts. When it comes to your credit and income, history is important, as lenders want to know that it has been good in the past and will likely be good in the future.
For mortgages in Montreal, just like the rest of Quebec and Canada, you’ll want to have a credit score of at least 600. You should try to improve your credit score as a higher score may qualify you for lower mortgage rates or a larger selection of lenders to choose from. This may reduce the cost of your mortgage.
If your credit score and/or income are too low to qualify for a mortgage from a bank, you may need to go with a private mortgage lender or alternative lenders in Montreal instead. While you may still be qualified for a private mortgage, their private mortgage interest rates can be significantly higher than rates offered by the major banks.
Another thing to consider is whether your income is high enough to buy a home. Your income and debt will be tested to see if you can still afford your mortgage payments should rates rise. This is done through what’s called a mortgage stress test, which banks are required to conduct. Failing the stress test will make you ineligible for a mortgage from a bank, but you may still qualify for a mortgage with a private lender.
The final history component that lenders check is your employment history. You’ll want to have been employed for at least two years prior to getting a mortgage, with a reasonable expectation that your employment will continue in the future. If you’re self-employed, this might mean having two years of consistent self-employment income.
Step 3: Check Your Mortgage Affordability
Knowing how much money you can borrow is important in order to know what kinds of homes that you can afford. Your mortgage affordability is based on your debt service ratios, called gross debt service (GDS) and total debt service (TDS), which measures your monthly income versus your monthly payments, such as your mortgage payment, housing costs, and debt payments.
There are limits to how high your debt service ratios can be. The maximum limit that is allowed by lenders determines how much you can afford to borrow. Each lender may set their own limits, but these limits generally follow the rules set by mortgage insurers, such as the CMHC's (Canada Mortgage and Housing Corporation) 39% limit for gross debt service and 44% limit for total debt service.
In order to afford a larger mortgage, you’ll need to either increase your income, reduce your debt payments, or both. Knowing your mortgage affordability allows you to know your maximum affordable home purchase price.
Step 4: Locate a Neighbourhood
Montreal is divided up into neighbourhoods that are called boroughs, with each borough having a distinct personality. From the densely populated Plateau-Mont Royal to the surrounding suburbs around the island, there’s something for everyone in Montreal.
When choosing a neighbourhood in Montreal, just like with any other city, there are things that you should consider. This might include nearby schools, grocery stores, shops, restaurants, public transit options, location, walkability, and even the safety of the neighbourhood.
At the bottom of this page, we’ve displayed neighbourhood stats on population, median household income, unemployment rate, most common home type, percentage of residents that are post-secondary educated, public transit users, and immigrants, as well as the median monthly shelter cost for owners and renters.
Comparing Montreal Neighbourhoods (2016 Census)
Step 5: Estimate Closing Costs
As a buyer, closing costs are fees that you’ll need to pay for when purchasing a home. The most common closing costs for home buyers in Montreal include land transfer tax, legal fees, and any necessary home inspections or appraisals.
In Montreal, land transfer tax is commonly referred to as the welcome tax. Montreal land transfer tax rates start at 0.5% and go up to 4.0% based on the purchase price of the home. First-time home buyer programs in Montreal may provide a rebate on this tax, or provide other financial assistance, if you qualify.
Estimating your buyer closing costs is a good idea to ensure that you have the funds available when it comes time to close on your home. Your real estate agent or lawyer will help you figure out what closing costs you’ll need to pay, as well as provide estimates for each of them.
How Much Are Closing Costs in Montreal? 💡
You should aim to have around 3% to 4% of your home’s purchase price saved up to cover closing costs associated with your home purchase in Montreal.
Step 6: Get a Mortgage Pre-Approval
While you may have already estimated your mortgage affordability, you should still aim to get a mortgage pre-approval before starting your home search. Getting pre-approved for a mortgage gives both you and your potential home sellers the confidence that you’ll be able to obtain financing for the purchase and go through with the deal. As a buyer, it also gives you a maximum purchase price limit to stay under, through the mortgage amount that your lender has pre-approved.
Getting a mortgage pre-approval also allows you to lock in a mortgage rate, sometimes for as long as 120 days, which means that you can search for homes while still having a guaranteed mortgage rate.
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Step 7: Find a Real Estate Agent
A real estate agent is your advocate when it comes to buying a home. With their expertise and guidance, real estate agents can help you find the perfect home. Best of all, there isn’t a direct cost to using a real estate agent to buy a home either! That’s because in Montreal, real estate agent commissions are paid by the seller of the home. This means that you get to have a professional on your side working for you without it costing anything out-of-pocket.
Finding a real estate agent means more than just looking up a name on the internet. It’s important to do your research and find an agent with expertise and experience working in Montreal, as well as one who has a good reputation. Reviews from past clients can be a great way to get an idea of what it’s like to work with a particular real estate agent.
Along with a real estate agent, you will also need to find a notary.
Step 8: Finding Your New Home
Searching for your new home is probably the most exciting part, but also the most daunting. Your real estate agent can help you narrow down your search based on price range, location, and other criteria that are important to you. Agents have access to a variety of listings, both listed and unlisted in the market, that can help you find the perfect property. You can still search for homes on your own as well, even while working with an agent.
Once you’ve found a few properties that you are interested in, you’ll need to dig in deeper and examine them carefully besides just having a walk-through tour of the home. A home inspection is generally recommended and worth the cost, as they can help identify potential problems and defects so that you can make an informed decision about whether or not to buy a particular property. Sellers may provide a warranty against defects on the home.
Step 9: Making Offers
In Montreal, when you do decide to buy a home, you’ll need to make an offer on the home to the seller. A home offer usually includes details about the price you’re willing to pay and any other conditions that may affect the seller's decision.
If you tie conditions to your purchase of the home, such as basing your purchase on whether or not you can get approved for financing or on a satisfactory home inspection, then it is called a conditional offer. In some highly competitive and sought after homes, buyers may even choose to submit offers without any conditions. That’s generally not recommended, as conditional offers are meant to protect you as a buyer.
Sellers may accept your offer, reject your offer, or provide a counter-offer. You may be competing against other buyers. In Montreal, the offer price of other buyers is hidden from you. That’s also known as blind bidding.
Step 10: Closing Date
If a seller accepts your offer, a range of motions must be completed before ownership is transferred to you. This includes getting a mortgage approval, signing contracts, transferring funds, and completing other necessary paperwork. Your real estate lawyer and agent will handle and guide you through this process.
Once this has been completed, you will officially become the owner of your new home!
Montreal Neighbourhood Profiles and Statistics
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Disclaimer:
- Any analysis or commentary reflects the opinions of WOWA.ca analysts and should not be considered financial advice. Please consult a licensed professional before making any decisions.
- The calculators and content on this page are for general information only. WOWA does not guarantee the accuracy and is not responsible for any consequences of using the calculator.
- Financial institutions and brokerages may compensate us for connecting customers to them through payments for advertisements, clicks, and leads.
- Interest rates are sourced from financial institutions' websites or provided to us directly. Real estate data is sourced from the Canadian Real Estate Association (CREA) and regional boards' websites and documents.