Understanding Mortgage Broker Fees in Canada

Reviewing mortgage documents with an Edmonton advisor.

As a mortgage broker in Canada, I often receive a common question: "How do mortgage brokers get paid?" Like all professions, mortgage brokers need to earn a living. Fortunately, in most cases, you won’t have to pay any fees to work with a mortgage broker.

How Does the Process Work?

Let’s break down how the process typically unfolds:

1. You either reach out to me or are referred because you need a mortgage.

2. We connect, and I assess your budget, situation, and goals to find the best plan, lender, and product for you.

3. I submit your application to your chosen lender and manage all communications.

4. Once the mortgage closes, we get paid.

   
   

How Do Mortgage Brokers Get Paid?

Here’s a detailed breakdown of how mortgage brokers earn their income:

Finder's Fees

• A finder's fee typically ranges from 0.20% to 1.10% of the mortgage amount.

• This percentage varies based on the lender, term, mortgage type, and other factors.

  
  

Important Notes:

• The fee is calculated before:

- Taxes

- Brokerage splits (mortgage brokerages take a portion of the fee)

- Team and mentor splits (some brokers work under a team or mentor and share the fee)

- Credit checks (we pay for credit checks, which are necessary for the process)

- Marketing costs

- Website and blog expenses, among others.

We only receive payment when a mortgage is fully closed. If a mortgage falls apart at the last minute, we do not get compensated for our efforts, which can sometimes take hours, weeks, or even months. Therefore, it’s crucial to trust your mortgage broker and provide all necessary information upfront.

Who Pays the Finder's Fees?

• Traditional Lenders (banks, credit unions, and monoline lenders):

- The bank or lender pays the mortgage brokerage, which then compensates me.

• Alternative and Private Lenders:

- Borrowers may need to pay a lender fee and a brokerage fee, depending on the specifics of the file.

- Alternative and private lenders may not always offer a finder’s fee, so a brokerage fee could be necessary. We will discuss any fees upfront to avoid surprises.

What About Mortgage Renewals and Refinances?

Renewals

• Renewing with Current Lender:

- Generally, mortgage brokers do not receive payment when borrowers renew with their existing lenders.

• Renewing with a Different Lender:

- We get paid as usual!

Refinances

• We receive payment for refinances just like we do for new mortgages.

  
  

Why Do Lenders Pay Mortgage Brokers?

Mortgage brokers act as specialized representatives. We are not tied to any specific lender. Instead of hiring more bank advisors or mortgage specialists, lenders rely on mortgage brokers to bring in qualified clients who fit their guidelines. In return, they pay us for our work in preparing comprehensive mortgage files.

Over the years, many borrowers have preferred working with mortgage brokers rather than directly with their banks. This preference stems from the access to a wider range of options and specialized guidance.

• You gain access to various mortgage options and expert advice without needing to learn everything from scratch.

• We are compensated for our expertise and time.

• Lenders receive well-prepared client mortgage files with minimal hassle, saving on marketing costs and administrative fees.

  
  

Conclusion

If you've made it this far, congratulations! You now have a clearer understanding of how mortgage brokers get paid. Our goal is to make your mortgage journey as seamless and stress-free as possible. We take the time to educate and guide you through the best options available.

Additionally, if you’re a first-time buyer, understanding your mortgage options is just as important as knowing the fees, check out our guide to first-time home buyer programs in Edmonton.

Have further questions? Let’s connect!

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