Search
  1. Home
  2. Mortgages
  3. What Is a Mortgage Broker?
Published September 1, 2021
Updated September 1, 2021

What Is a Mortgage Broker?

A mortgage broker can help you find competitive interest rates on your home loan.

Finding a mortgage can be stressful and shopping around trying to find the best rates can take a lot of time. But, it doesn’t need to be on your time. You can work with a mortgage broker who will do the job for you.

But what is a mortgage broker? What exactly do they do, and are they worth it?

What does a mortgage broker do?

A mortgage broker is a licensed mortgage specialist who acts as a mediator between you (the borrower) and the mortgage lender. They are legally required to work in your best interests, so you don’t normally need to worry about them prioritizing their fees over your needs.

A mortgage broker will shop around and do the work to help find you the lowest rate possible for your mortgage. Whereas a bank can only offer you their own products, a mortgage broker has connections with multiple lenders to provide you with more, and perhaps better, options. Mortgage brokers often get volume discounts which they can then pass onto you.

How do mortgage brokers get paid?

One of the first things that people worry about when it comes to mortgage brokers is how much they cost. After all, buying a home is already an expensive process. Well, the good news is that even though the mortgage broker does charge a fee, you aren’t necessarily the one who will pay.

Cost for creditworthy clients

Mortgage brokers get paid when they close a deal, so it is in their best interest to work with a client eligible for a large mortgage. To do this, a broker will assess whether not the bank would consider you a creditworthy client — someone in good financial standing who will likely be approved for the loan.

If you are a creditworthy client, you won’t have to pay the mortgage broker. Instead, how much a mortgage broker makes depends on the commission paid by the lender.

The amount of commission is typically between 0.5%-1.2% of your full mortgage amount, but it will depend on several variables, including the term and type of mortgage. A mortgage broker will rarely charge a creditworthy borrower any fees. After all, they want you to recommend them. However, they can charge you a cancellation fee if you back out of a mortgage after being approved.

» MORE: Make sure you’re aware of other common closing costs

Cost for other clients

Mortgage brokers don’t exclusively work with ideal borrowers.

For clients who don’t easily qualify for a mortgage because they can’t pass the mortgage stress test or have a poor credit score, mortgage brokers charge a one-time fee that is only paid once the mortgage is approved and closed. Mortgage broker fees range from 0.5% to 2%.

This fee is because clients who have a poor credit score or don’t easily qualify for a mortgage often require more work to get approved and have more complex applications.

All fees will be listed upfront and in your contract, so make sure you read and understand all the costs before signing.

» INCREASE YOUR ODDS: How to get a better credit score

What to know before selecting a mortgage broker

Mortgage brokers may or may not be required to be licensed, depending on your province or territory. Legally they are required to work in your favour, but that doesn’t mean that all mortgage brokers are equal.

Take the time to read reviews and check references online or talk to friends and family to get some recommendations. When you think you have found someone, you should take the time to meet with them in person and ask a few questions to get a sense of whether or not they are a good fit for you.

Some of the things you should ask include:

  • What is their experience? (How long have they been working as a mortgage broker? The longer, the better.)
  • What are their credentials?
  • Have they taken any additional licensing courses?
  • Who are their lenders? (The more lenders, the better.)

Taking the time to meet your potential mortgage broker will also give you an idea about how informed they are and how they will treat you if you work together. But don’t just rely on their expertise — you should go in prepared as well. Do some research on mortgage rates currently available to you so that you can compare.

» DECIDE: Should you use a mortgage broker or go straight to the bank?

Pros and cons of using a mortgage broker

Some people love working with a mortgage broker, while others don’t. It all depends on your needs as a borrower.

Pros

  • Mortgage brokers offer a one-stop-shop for finding a mortgage and receiving expert advice
  • They are independent and on your side
  • They likely have access to better rates
  • If you are creditworthy, you won’t pay any fees
  • If you aren’t an ideal borrower, they can still help you get a mortgage

Cons

  • Brokers may not have access to all lenders
  • Ideal borrowers have to pay an extra cost
  • You’ll have yet another person to deal with in the process
  • You’ll need to organize more documents and paperwork
  • Brokers may not have access to all lenders
  • You can’t use your relationship with a financial institution as leverage

» MORE: How to negotiate a mortgage

About the Author

Hannah Logan
Hannah Logan

Hannah Logan is a writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21.

DIVE EVEN DEEPER

8 Expert Tips for Negotiating Your Mortgage

Negotiate your mortgage fees and interest rate with your lender to save thousands and make sure you get the best deal on your home loan.

First-Time Home Buyer Guide

Ready to buy a home? See if you qualify as a first-time home buyer, find government help and get tips for choosing the right mortgage.

How to Choose a Mortgage Lender

A mortgage lender provides your home loan. Know your credit score and income to determine eligibility. Compare to find the best interest rate.

Realtors, Real Estate Agents and Brokers: What’s the Difference?

A mortgage lender provides your home loan. Know your credit score and income to determine eligibility. Compare to find the best interest rate.