Are you planning to buy a home in Montreal some time soon? If so, you should get familiar with the current real estate market in the city to find out how much homes are going for these days, as well as what the temperature of the market is like.
Having a solid understanding of the market that you’re buying in will not only make you a more informed buyer, but will also give you a clear picture of what you can and cannot afford.
Let’s take a look at where home prices are currently at in Montreal, and go over some tips to make sure you make a sound purchasing decision.
What Affects Home Prices?
The average price of a home is not arbitrarily chosen by real estate industry professionals. Instead, there are several factors that play a key role in how home prices behave at any given time.
Location is perhaps the most important factor involved in the value of real estate. It’s generally understood that the same home in one location can be vastly different from its value in another part of town. For instance, a 2-bedroom bungalow in a desirable neighbourhood in the city will likely be much more expensive than the same type of dwelling in a rural location.
Further, the exact location within a specific neighbourhood will also determine the value of a home. For instance, a home perched on a large private lot on a quiet cul de sac will be valued higher than if the home was located on a busy street backing onto a hydro field.
Age And Condition Of The Home
The age of a home and the condition it’s in will determine its value. Properties that are well cared for and updated can fetch a higher price than homes that are in need of some TLC.
Further, age can play a role as well. Generally speaking, older homes that have not been renovated over the years will likely require repair compared to newer homes with newer materials and finishes.
Number Of Bedrooms And Bathrooms
In general, the more bedrooms and bathrooms a home has, the higher-priced it will likely be, with all other factors considered.
More square footage means more building material needed to construct the home, which costs more money. As such, larger homes are generally more expensive than smaller homes in the same neighbourhood.
Finishes And Features
Certain finishes are more expensive and considered more desirable than others. For instance, hardwood flooring, granite countertops, and stainless steel appliances are more highly favoured by buyers than wall-to-wall carpeting, laminate counters, and white appliances.
Learn about the pros and cons of renting vs buying a home.
How Are Listing Prices Determined?
As a buyer, you may be wondering how listing prices are determined, and if they’re even fair or accurate. Granted, sellers can technically choose any listing price they want, but without careful consideration and homework, a listing price that does not accurately reflect the current market will likely result in a home that never sells.
That’s why it’s important for sellers to list appropriately, and for buyers to do some homework to determine what the current value of a home is before putting in an offer.
Real estate professionals who represent sellers typically look at historical sales to see what homes recently sold for. They’ll pull a list of “comps,” or comparables, that will help determine an appropriate and accurate listing price. The properties that make this list should meet the following criteria:
- Must be similar to the subject property
- Must have recently sold no further back than 3 to 6 months ago
- Must be located in the same neighbourhood
Once this list is generated, the real estate agent will then make any adjustments necessary to arrive at a listing price. They’ll compare things like the type of dwelling, number of bedrooms and bathrooms, square footage, age and condition of the home, layout, and size of the lot, among other things. The closer the comps are to the subject property, the better.
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Average Price Of Homes In Montreal
In Montreal, the average price for a home is currently $426,500 as of December 2020. Home prices in the city have increased 18.2% over the past 12 months. During the same month the year before, home prices in Montreal were averaging $360,900.
Comparing Average House Prices By City
|Home Prices 2020||Home Prices 2019||Year-Over-Year % Change|
How Do Montreal Home Prices Compare To Quebec And The Rest Of Canada?
The average price for a home in Montreal is just slightly higher than the province-wide average of $404,010. But, it’s much less than the nation-wide average of $607,280. That said, home prices in Montreal, Quebec, and Canada have skyrocketed over the past year. From December 2019 to December 2020, home prices increased 18.2%, 18.8%, and 17.2%, respectively.
How To Determine How Much To Spend On A Home In Montreal
Before you start house hunting, it’s important to sit down and figure out exactly how much you can comfortably afford to spend on a home in Montreal. The number you come up with should not only fit your budget, but should also leave you with a little financial wiggle room so you still have plenty of money leftover to spend on other things.
Get Pre-Approved For a Mortgage
Perhaps the first thing you should do before you even call a real estate agent is speak with a mortgage broker and get pre-approved for a home loan. The lender will look at your income and debts to determine the loan amount you may be able to qualify for.
By getting pre-approved, you’ll have a much clearer understanding of how much of a loan you can get approved for. With this figure in mind, you’ll be able to narrow down your choices when it comes to the properties you view, so there’s a lot less time wasted.
It’s important to understand, however, that pre-approval does not mean final approval. If anything changes from the time you’re pre-approved to the time you find and buy a home, you could still be denied a mortgage. For example, if you lose or change your job or take on additional loans, you could throw off your debt-to-income ratio, which will require the lender to recalculate your ability to secure a mortgage, and for how much.
Subtract Your Debt From Your Income
Find out how much you have leftover every month after all your bills have been paid. Your income certainly plays a role in the price point you can afford when buying a home, but that doesn’t give you the full picture if a lot of that income is dedicated to paying other bills.
Make a list of everything you spend every month, then subtract it from your income to make sure you have enough leftover at the end of the day to cover your mortgage and all homeownership costs, which we’ll get into next.
Factor In The Cost Of Homeownership
Your mortgage payments might be the most expensive bill to pay when it comes to buying and owning a home, but there are other costs associated with running a home, including home insurance, property taxes, utilities, maintenance and repairs, furnishings, and so forth. Be sure to factor in these costs when determining how much to spend on a home in Montreal.
Follow these tips to help you come up with a price point you can afford without becoming “house poor.”
How To Improve Your Chances Of Getting Approved For A Mortgage
To boost the odds of getting approved for a mortgage to buy a home in Montreal, follow these tips.
Take Time To Save For A Large Down Payment
The more money you put down towards the purchase price of a home, the less you’ll have to borrow. This can be a good thing for a few reasons.
For starters, a lower loan amount can increase your chances of getting approved for a mortgage, especially if the loan amount is much less than the purchase price. By making a larger down payment, you lower the risk both for yourself and the lender. And the lender will be more comfortable extending a loan to someone who is able to show that they can contribute a significant portion of the purchase price of a home.
Secondly, you may be able to secure a lower interest rate. The lower the risk you are to your lender, the more likely they will be to offer a lower rate. But if you are a higher risk, the lender may choose to increase the interest rate to offset their risk. If you can lock in a lower rate, you’ll be saving a ton of money in interest over the life of your loan.
Finally, a lower loan amount as a result of a larger down payment means lower mortgage payments. And smaller monthly payments means more money leftover for other expenditures.
Strengthen Your Credit Score
Not only does a large down payment mean a better chance of getting approved for a mortgage with a lower interest rate, but so does a strong credit score. In fact, your credit score plays one of the biggest roles in your ability to secure a home loan. So the higher it is, the better.
If your credit score is currently on the low side, you may want to take the time to improve it before applying for a mortgage. Here are some things you can do to strengthen your credit score:
- Pay your bills on time
- Pay your credit card bill in full rather than making minimum payments
- Don’t spend any more than 30% of your credit limit
- Don’t take out any additional loans or credit lines
- Keep old credit accounts open
- Pay down your debt
Montreal is a fabulous place to call home, and it’s relatively affordable compared to other busy cities across Canada. That said, buying a home in Montreal still requires a hefty financial commitment. Before agreeing to purchase a home in Montreal, be sure to get your finances in order and do your homework to make a more informed buying decision.
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