A common question I receive from new clients is, "How much will I have to pay you?"
The answer is often $0.00!
For typical borrowers who fully qualify under bank lending guidelines, the services of a mortgage broker are generally free. Mortgage brokers are compensated through a finder's fee or commission from the lender with whom they arrange your mortgage.
Alternative Lenders and Private Lenders
In cases where a borrower needs an alternative or private lender, there may be a fee involved. However, that’s a topic for another blog!
Key Points to Know
Mortgage broker commissions from lenders are usually a percentage of the mortgage amount, and this percentage varies depending on the term length. For example, if a borrower chooses a 5-year fixed mortgage, the broker typically earns about 1%. If they opt for a 3-year fixed mortgage, the commission is usually closer to 0.65%.
In addition to the basic commission, brokers may receive other incentives:
Volume Bonuses: Lenders reward brokers based on the volume of business they bring in annually.
Trailer Fees: Some lenders pay brokers a small fee over the mortgage term or upon renewal.
These additional earnings come from the lender and do not directly impact borrowers. This commission structure allows brokers to assist clients without charging directly. A good mortgage broker will never let their own compensation influence the mortgage product they recommend. The mortgage should always be tailored to the borrower’s needs. However, it’s important for borrowers to understand that lenders compete for brokers' business and may offer perks that could sway their decision. All compensation must be disclosed on a compliance document called the Form 10.
It's a good idea to ask your Broker directly how and why they chose the lender the did, don't be afraid to ask if any lender offering less comp had a better product suited to your needs.
Comments