Mortgage Brokers In Canada: What They Do

If you’ve never had a mortgage, or have traditionally turned to banks when needing a home loan, you probably haven’t dealt with any mortgage brokers.

Mortgage brokers have unique relationships with Canadian lenders, including non-bank financial institutions. Using a mortgage broker can improve your chances of scoring a mortgage that fits your budget, lifestyle and financial goals. It can also save you money.

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What is a mortgage broker?

A mortgage broker is a licensed professional who acts as an intermediary between homebuyers who need financing and mortgage lenders who provide that financing. Mortgage brokers do not lend their own money or work directly for financial institutions.

What do mortgage brokers 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, whose expectations may not always align with reality.

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.

The difference between mortgage brokers, 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 and 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. Rather than working with multiple financial institutions, these 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 BMO, 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.

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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. What you pay will depend on several variables, including the term and type of mortgage you agreed to.

Fees

A mortgage broker will rarely charge a creditworthy borrower any fees. There may, however, be a cancellation fee if you back out of a mortgage after being approved.

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 potential mortgage brokers

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.
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.

Advantages and disadvantages of using mortgage brokers

You’ll need to work with a mortgage professional of some kind if you want to secure a home loan, but you don’t necessarily have to enlist the services of a mortgage broker.

Weighing the advantages and disadvantages of working with a mortgage broker vs. the bank or a direct lender can help you decide if that’s the path to financing you’d like to take.

Mortgage broker advantages

Mortgage brokers offer a one-stop-shop for both mortgage options and the kind of expert advice that can help you improve your finances and look more creditworthy in the eyes of lenders.
Brokers are usually independent and aren’t obligated to recommend a particular financial institution’s mortgage products.
Because brokers have relationships with a variety of lenders, they may be able to find you a lower interest rate and more flexible loan product.
If you are creditworthy, you won’t pay any fees.
Many brokers specialize in helping borrowers in more challenging financial situations get mortgages.

Mortgage broker disadvantages

Brokers don’t have access to every single lender, and less experienced brokers may have fewer lender relationships than those who’ve been in the industry a long time.
Borrowers with more challenging applications might have to pay an extra cost.
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.
You may not be able to use a long-standing relationship with a bank to your advantage if you work with a broker.

In Canada, you won’t pay a mortgage broker for their services in most cases. Brokers are paid commission directly by lenders. You should only have to pay a broker if your mortgage is challenging or you work with a lender that charges broker fees.

If you get a mortgage directly from a bank or credit union, you don’t need to use a mortgage broker. Some B lenders or private lenders, on the other hand, can only be accessed if you use a broker.

About the Authors

Clay Jarvis

Clay Jarvis is NerdWallet’s mortgage and real estate expert in Canada. Thus far, his entire professional writing career has revolved around real estate. Prior to joining NerdWallet, he was the…

Hannah Logan

Hannah Logan is a freelance 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.