Mortgages Quebec City
Compare and Save With Loans Canada
Written by Bryan Daly
Best Mortgages Quebec City (Online) August 2021
Note: Loans Canada does not arrange or underwrite mortgages or any other financial service. We are a simple referral website that provides free educational resources to help Canadians make better decisions.
With over 800,000 residents, the greater metropolitan area of Quebec City is constantly expanding and driving up the price of real estate. Nevertheless, there are plenty of ways to find an affordable home within the city limits, as long as you know where to look.
Then again, the home you want may be too pricey to purchase immediately, so a mortgage may be the best way to go. Fortunately, there are several mortgage types available in Quebec City. Take a look at the information below so you can decide which is right for you.
Mortgage Amortizations, Terms, and Payment Frequencies
Essentially, a mortgage is a loan that you can borrow through select lenders across the country. However, unlike traditional loan products, this one is meant specifically to purchase a house or other real estate property over time. You would then repay your lender gradually through divided installments.
This refers to the general time that it takes to pay off your property. Although some homeowners can purchase their home quickly and early payments (prepayments) are often possible, most mortgages take at least one or two decades to complete in full.
While the maximum Canadian amortization period is currently 25 years if your down payment is less than 20%, certain mortgage types allow you to pay off your property for up to 35 years if you put down more.
Every mortgage is separated into terms that last anywhere from 6 months to 10 years each. During every term, you’ll be committed to one lender and pay whatever fixed or variable interest rate you initially qualified for. Once your term is up, you can renew your contract or apply with a different lender to find better conditions.
Be careful, because while your present mortgage may not be ideal, most lenders will charge you a penalty to break your contract before your term is over. Not to mention, reapplying and getting approved with another lender isn’t always easy or cheap.
Once you’ve been approved for a mortgage in Quebec City, you and your lender will work out a plan that separates the full cost of your loan into installments (including interest and fees). Generally speaking, you’ll have a few payment frequency options, such as:
- Monthly = 12 installments annually
- Semi-monthly = 24 installments annually
- Weekly = 52 installments annually
- Bi-weekly = 26 installment annually
- Prepayments = Larger or earlier installments
Keep in mind that every mortgage is slightly different and some lenders won’t offer all these options or allow you to adjust your payment frequency mid-term, at least without a penalty. The conditions of your particular mortgage will also vary greatly depending on how healthy your finances are.
Debt problems can occur if you end up with a mortgage that you cannot afford, especially if you lose your job or suffer some other financial emergency during your repayment plan. Always choose your mortgage lender wisely and make sure they offer rates, terms, and payment frequencies that suit your financial needs.
Earning Mortgage Approval
That brings us to our next topic; how to get approved for a favourable mortgage in Quebec City. Remember, while housing prices fluctuate in different areas of the country, decent homes cost hundreds of thousands of dollars and most lenders can’t offer that kind of money to every applicant. Be sure to consider these factors before entering the approval process:
The OSFI Stress Test
As of 2018, all prospective home buyers must undergo the stress test, which was designed by the Office of the Superintendent of Financial Institutions to determine whether someone can actually make their mortgage after they’re approved.
During this test, your income, credit, and assets will be inspected to see if you can afford your installments, a good downpayment, as well as the interest you would be charged if Canadian rates were to climb over the course of your mortgage.
Getting pre-approved is another essential aspect of the mortgage process in Quebec City. Similar to a stress test, lenders will look over your finances to determine whether you’re eligible. This may be done at your bank, credit union, or a lender that specializes in mortgages.
Once the pre-approval is done, you should know exactly how much money you would be approved for (if at all), the possible conditions of your repayment plan, and your interest rate for the first 60-120 days of your mortgage.
However, pre-approval only gives you an idea of what mortgage you can get if all goes well. The actual amount you’re approved for will depend mainly on the value of your potential home, as well as how much of a down payment you can make.
The Credit Check
Most lenders will check your credit report before they pre-approve you for a mortgage because it shows them how you’ve handled your previous credit products. Positive payment history and decent credit ratings are signs that you’re a responsible borrower.
Your credit score ranges from 300-900 and will also be used to measure your creditworthiness. A good credit score is anywhere from 660 to 900 but most mortgage lenders prefer that yours is at least 620-680 before they’ll consider you. Anywhere below that and you would risk getting an unfavourable mortgage or declined altogether.
Your Down Payment
Although you can find a mortgage if you have enough money for a small down payment, saving for a larger one will work in your favour because it can help you secure more money, lower payments, and get you out of debt quicker.
Not to mention that if you put down less than 20% of your home’s asking price, you will need to purchase mortgage default insurance, which is mandatory for high-ratio mortgages but would have otherwise been optional.
Mortgage Rates and Hidden Costs
In Quebec City, you’ll find the same mortgages as in the rest of Canada. However, mortgage rates differ from province to province. Typically, the more expensive a home is, the more mortgage debt you’ll have and the more interest you’ll pay over time.
Additionally, there may be a number of unexpected costs that come about when purchasing a home, such as:
- Taxes (HST, GST, property, etc.)
- Home inspections & appraisals
- Administrative fees & loan origination
- Moving & utilities
- Furniture & appliances
- Repairs & maintenance
- Extras (internet, phone, etc.)
Remember, the stronger your finances are, the easier it is to secure a favourable mortgage in Quebec City. Although a good down payment and credit score are essential, so is a decent income, a large savings account, and a low amount of debt.
Overall, you must show your lender that you can afford all the costs associated with your mortgage and living situation, even if interest rates rise or you can’t work for some reason. If your finances aren’t stellar at first, you can also strengthen your application by offering collateral or finding a cosigner.
Mortgages Available In Canada
As mentioned previously, it’s always a good idea to spend some time comparing mortgage lenders, rates and offers before you apply. Here are some of the mortgages that are popular amongst prospective homeowners in Quebec City:
- Conventional – Otherwise known as a “low ratio” mortgage, you will need a minimum down payment of 20%, a solid income and good credit in order to be approved. In this case, mortgage default insurance is optional.
- High-Ratio – Although mortgage insurance is necessary here, this is the most common mortgage option for anyone who has an average income, moderate credit, and/or a down payment of less than 20%.
- Fixed-Rate – If you’re able to lock in a low-interest rate during pre-approval, you can apply for a fixed-rate mortgage. Here, your rate won’t change during your mortgage term, making your payments easier to budget for.
- Variable Rate – Here, your interest rate will fluctuate with the Bank of Canada’s prime rate. While you could pay more if rates increase during your mortgage term, you can surely save some money when they drop.
- Closed – If you’re under a strict budget, a closed mortgage might be best because you’re only allowed to pay off a specific amount of debt each year. Unfortunately, penalties will apply for any prepayments you want to make.
- Open – You can also apply for an open mortgage, where you won’t be charged if you want to pay your mortgage ahead of schedule.
- Bridge Loans – A good solution for those with bad credit, a bridge loan allows you to cover the financial gap between closing dates when you’re looking to sell your current property and mortgage another.
- Second Mortgage – If your current home has accumulated at least 20% equity, you can offer it as collateral in exchange for a loan or line of credit (HELOC). That product will then become your “second” mortgage until your primary mortgage is fully paid.
Your Mortgage Is Closer Than You Think
If you’ve been having trouble finding an affordable mortgage in Quebec City, don’t forget to contact the experts at Loans Canada. We can put you in contact with the best mortgage lenders, rates, and conditions in your area.