What Is a Mortgage Broker?
A mortgage broker is a licensed professional who acts as an intermediary between homebuyers who need a loan and the mortgage lenders who provide that financing.
Mortgage brokers do not lend their own money or work directly for financial institutions, instead, they have relationships with multiple lenders.
Using a mortgage broker can help you score a mortgage you can afford. It can also save you money.
Pros and cons of using a mortgage broker
Pros
- Offers a one-stop-shop for comparing mortgage options and expert advice.
- Not obligated to recommend a particular financial institution’s mortgage products.
- May be able to find you a lower interest rate and more flexible loan product.
- Many specialize in helping borrowers in more challenging financial situations get mortgages.
Cons
- Less experienced brokers may have fewer lender relationships.
- Deciding between the many options a broker can offer may be overwhelming.
- If your broker has to shop your mortgage to multiple lenders, you may need to organize more documents and paperwork.
What does a mortgage broker do?
Assess your finances
A mortgage broker will look objectively at your income, credit history and the current lending environment to calculate how much mortgage you can afford. This can be an invaluable resource for first-time home buyers.
Compare mortgage products
Reviewing current mortgage rates can be like finding the right credit card. Ideally, you want to shop around and do some thoughtful comparisons before making a decision. But you might not have the time, mental energy or confidence to do it yourself.
Mortgage brokers take care of these comparisons for you. They weigh loan options from Big Six banks, such as RBC and TD, B lenders and maybe even private lenders. A broker will explain the differences between the products and help you understand how much each one will cost you.
After you choose the loan offer you’re most comfortable with, your broker will help submit your mortgage application to the appropriate lender.
Advocate for you
A good broker will act as your advocate when talking to lenders who may have doubts about funding your mortgage. Brokers might urge a lender’s underwriter to take another look at the numbers, or explain the full story of your financial stability. Such a story can’t always be told in digits.
Negotiate
A mortgage broker may also negotiate with lenders to get you more suitable terms and a lower interest rate. This isn’t always a possibility, but it’s something you can feel comfortable asking them to do.
How mortgage brokers get paid
Commission
Mortgage brokers generally work on commission, meaning they get paid after a borrower signs their mortgage contract. In most cases, a broker’s commission fees are paid by the lender, not the borrower.
A broker’s commission is typically 0.5%-1.2% of the full mortgage amount.
Fees
A mortgage broker will rarely charge a creditworthy borrower any fees.
For clients who don’t easily qualify for a mortgage — maybe they can’t pass the mortgage stress test or have a low credit score — mortgage brokers may charge a one-time fee that is only paid if the mortgage is approved and closed.
Borrower-paid mortgage broker fees range from 0.5% to 2% of the mortgage amount. This fee compensates the broker for the extra work required to get approval for borrowers with more complex applications.
All broker fees should be listed upfront and in your contract. Make sure you ask about — and understand — all the costs before signing.
How to choose a mortgage broker
There are approximately 30,000 licensed brokers agents and other mortgage professionals operating across the country, according to Mortgage Professionals Canada. Finding the right one requires a little due diligence, so plan on:
Checking a broker’s website for reviews, accreditation and any awards they may have won. Don’t stop there. Check the reviews they’ve received elsewhere; they might be a little more objective than a prominently-placed on-site testimonial.
Reaching out to friends and family who recently purchased homes of their own to get their recommendations, too. A good broker is worth sharing.
When you think you’ve found a broker you’d like to work with, set up a meeting or call so you can ask a few questions and get a sense of whether they’re a good fit for your situation.
Questions to ask a mortgage broker
How long have you been working as a mortgage broker? The longer a person’s been a broker, the more varied their experience should be.
What did you do before becoming a mortgage broker? Someone who just moved into mortgages after selling used cars, for example, may not have the same expertise as someone who worked at a bank or real estate brokerage prior to becoming a broker.
What professional credentials do you have? Are they up to date? Mortgage brokers are licensed professionals who must maintain good standing with provincial regulators.
What are some examples of challenging mortgage approvals you worked on? Find out what skills a broker is bringing to the table. For example, if you’re a freelancer, a mortgage broker who has worked with self employed clients would be a big asset.
How many lenders do you work with? The higher the number, the more rate and product options they’ll be able to evaluate for you.
What separates you from your competitors? If the answer is “lower rates” and little else, you may want to keep looking.
Taking the time to meet your potential mortgage broker will also give you an idea of how informed they are and how they might treat you if you work together.
Mortgage brokers vs. advisors, specialists and agents
There are several professionals with “mortgage” in their job title. They can all help you get a mortgage in Canada, but they don’t all perform the same role.
Mortgage brokers vs. mortgage agents
Mortgage brokers and mortgage agents both compare the mortgage products and interest rates offered by multiple lenders as a means of finding a home loan that works for you. Your broker or agent will then submit your application to the lender you choose to go with.
The primary difference between brokers and agents is that brokers have earned an extra level of accreditation. This allows them to manage agents and carry out compliance-related responsibilities.
Mortgage advisors and mortgage specialists
Mortgage advisors and mortgage specialists perform a similar job. They are banks’ and mortgage lenders’ own in-house mortgage professionals. They’ll still assist you in finding a suitable mortgage, but the selection will be limited to products offered by the institutions they work for.
A mortgage advisor at RBC, for example, won’t discuss mortgages offered by Scotiabank or a mortgage finance company like MCAP. A broker, on the other hand, might have a relationship with all three institutions.
Frequently asked questions
Is it worth it to pay for a mortgage broker?
Is it worth it to pay for a mortgage broker?
In Canada, you don't pay mortgage brokers for their services. Brokers are paid commission directly by lenders. You may have to pay a broker a fee if your mortgage is especially challenging.
Can I get a mortgage if I don’t use a mortgage broker?
Can I get a mortgage if I don’t use a mortgage broker?
If you get a mortgage directly from a bank or credit union, you don’t need to use a mortgage broker. Some alternative lenders or private lenders, on the other hand, can only be accessed if you use a broker.
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