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, instead, they have relationships with multiple lenders.

Using a mortgage broker can improve your chances of scoring a mortgage you can afford, lifestyle and financial goals. It can also save you money.

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. 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:

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

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.

Pros and cons of using a mortgage broker

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 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.