Purchasing property in Quebec, Canada, involves specific legal and procedural steps. Here’s how you can navigate the process effectively and avoid scams:
Step 1: Assess Your Needs and Budget
- Determine the type of property (condo, house, land, commercial).
- Calculate your budget, including taxes, fees, and closing costs (usually 3-5% of the purchase price).
- Pre-qualify for a mortgage with a bank or financial institution.
Step 2: Hire a Real Estate Agent
- Work with a licensed real estate broker registered with the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ).
- An agent will help you find suitable properties and negotiate terms.
Step 3: Search for a Property
- Use online platforms or consult your agent for listings.
- Consider location, property condition, amenities, and proximity to schools or transit.
Step 4: Make an Offer
- Once you find a property, submit a Promise to Purchase (Offer to Purchase).
- The offer includes:
- Price
- Deposit amount (usually 5% of the purchase price)
- Conditions (e.g., financing, inspection, or sale of your current property).
- If accepted, the seller signs to formalize the agreement.
Step 5: Conduct a Home Inspection
- Hire a certified building inspector to evaluate the property’s condition.
- Use the inspection report to renegotiate the price or request repairs, if necessary.
Step 6: Finalize Financing
- Secure your mortgage with a lender.
- Provide necessary documents, such as proof of income, identification, and property details.
Step 7: Hire a Notary (Mandatory in Quebec)
- In Quebec, a notary oversees the legal transfer of property ownership.
- The notary ensures the title is clear, property taxes are paid, and all conditions of the sale are met.
Step 8: Sign the Deed of Sale
- On the closing date, sign the Act of Sale with the notary.
- Pay the balance of the purchase price and other closing costs.
Step 9: Pay Property Transfer Tax (Welcome Tax)
- Quebec charges a transfer tax based on the purchase price:
- 0.5% for the first $52,800.
- 1% on $52,800 to $264,000.
- 1.5% on amounts above $264,000.
- In Montreal, an additional 3% applies for amounts over $2 million.
Step 10: Take Possession
- Receive the keys to your new property after the transaction is complete.
How to Avoid Scams in Quebec
- Verify Ownership:
- Ensure the seller legally owns the property through the notary’s title search.
- Beware of Unrealistic Prices:
- If the price is too good to be true, it may indicate fraud.
- Avoid Unregistered Agents:
- Work only with agents registered with OACIQ.
- Inspect the Property:
- Avoid purchasing without a thorough home inspection.
- Review Contracts Carefully:
- Have the notary or a lawyer review all legal documents before signing.
Costs Involved in Quebec Property Purchase
- Down Payment: Minimum 5% for Canadian residents.
- Legal Fees: $1,000–$2,000 for notary services.
- Property Taxes: Annual taxes vary by municipality.
- Insurance: Mortgage and homeowner insurance are mandatory.
- Closing Costs: Approximately 3-5% of the purchase price.
What is a minimum down payment
A down payment is the amount of money you put towards the purchase of a home. Your lender deducts the down payment from the purchase price of your home. Your mortgage covers the rest of the price of the home.
The minimum amount you need for your down payment depends on the purchase price of the home.
If your down payment is less than 20% of the price of your home, you’ll typically need to buy mortgage loan insurance.
| Purchase price of your home | Minimum amount of down payment |
|---|---|
| $500,000 or less | 5% of the purchase price |
| $500,000 to $1.5 million | 5% of the first $500,000 of the purchase price10% for the portion of the purchase price above $500,000 |
| $1.5 million or more | 20% of the purchase price |
If you’re self-employed or have a poor credit history, your lender may require a larger down payment.
Normally, the minimum down payment must come from your own funds. It’s better to save for a down payment and minimize your debts.
Example: How to calculate your minimum down payment
The calculation of the minimum down payment depends on the purchase price of the home.
If the purchase price of your home is $500,000 or less
Suppose the purchase price of your home is $400,000. You need a minimum down payment of 5% of the purchase price. The purchase price multiplied by 5% is equal to $20,000.
If the purchase price of your home is more than $500,000
Suppose the purchase price of your home is $600,000. You can calculate your minimum down payment by adding 2 amounts. The first amount is 5% of the first $500,000, which is equal to $25,000. The second amount is 10% of the remaining balance of $100,000, which is equal to $10,000. Add both amounts together which gives you a total of $35,000.
What is mortgage loan insurance
Mortgage loan insurance protects the mortgage lender in case you can’t make your mortgage payments. It doesn’t protect you. Mortgage loan insurance is also sometimes called mortgage default insurance.
If your down payment is less than 20% of the price of your home, you’ll typically need to buy mortgage loan insurance.
Your lender may require that you get mortgage loan insurance, even if you have a 20% down payment. That’s usually the case if you’re self-employed or have a poor credit history.
Mortgage loan insurance isn’t available if:
- the purchase price of the home is $1 million or more
- the loan doesn’t meet the mortgage insurance company’s standards
Your lender coordinates getting mortgage loan insurance on your behalf if you need it.
Cost of mortgage loan insurance
The fee you pay for mortgage loan insurance is called a premium. Mortgage loan insurance premiums range from 0.6% to 4.5% of the amount of your mortgage. Your premium depends on the amount of your down payment. The bigger your down payment, the less you pay in mortgage loan insurance premiums.
Find premiums based on the amount of your mortgage:
You may pay your premium by adding it to your mortgage or with a lump sum up front. If you add your premium to your mortgage, you pay interest on your premium. The interest rate is the same rate as you’re paying for your mortgage.
Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums. Your lender can’t add the provincial tax on premiums to your mortgage. You must pay this tax when you get your mortgage.
How the down payment affects the total cost of your mortgage
Save as much as you can for your down payment. The bigger the down payment, the smaller the mortgage, which may save you thousands of dollars in interest charges.
Example: How the size of a down payment affects the cost of a mortgage
Suppose you buy a home that costs $400,000.
Assume the following:
- interest rate is 4%
- amortization period is 25 years
- payment frequency is monthly
- mortgage loan insurance premiums are added to the mortgage
| Down payment | Down payment amount | Mortgage | Mortgage loan insurance premium | Mortgage (includes insurance premium) | Total cost of your home (includes all columns) |
|---|---|---|---|---|---|
| 5% | $20,000 | $380,000 | $15,200 | $395,200 | $643,649 |
| 10% | $40,000 | $360,000 | $11,160 | $371,160 | $625,712 |
| 20% | $80,000 | $320,000 | Not required | $320,000 | $584,979 |
