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How do mortgage brokers get paid?

This piece was originally published on August 31, 2020, and was updated on October 31, 2023.

If you’re shopping for a mortgage, working with a mortgage broker is one of the most effective ways to get the most advantageous rate.

These are mortgage professionals who have independent relationships with a variety of lenders. Unlike banks, which can only offer borrowers their own mortgage products and services, mortgage brokers can give borrowers access to rates and products they may not otherwise have. Mortgage brokers can also offer some of the lowest rates on the market due to practices such as bought-down commissions, or passing volume discounts along to borrowers.

A mortgage broker offers an origination service for your mortgage, and works with you for the entire process, from the initial application all the way through to the home appraisal and closing stage. They’re also generally free for borrowers to use as their fees are covered by the lenders they work with. 

Also read: Choosing a mortgage provider

However, there are some particulars around how brokers get paid that borrowers should be aware; while these professionals are legally required to always work in their clients’ best interests, there are questions you should be asking as a borrower to fully understand a broker’s relationship with the lender they’re recommending to you.

Let’s take a deeper look into how mortgage brokers get paid.

How do mortgage brokers get paid?

A mortgage broker is paid via a commission from mortgage providers. When a broker connects a borrower with a lender, the broker will be paid a percentage of the loan amount by the lender. Mortgage brokers generally do not charge the borrower directly.

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How much do mortgage brokers make?

Mortgage broker commissions vary between banks and individual brokers. However, a typical range might be 0.5% to 1.2% of your full mortgage amount. The exact percentage will also depend on the term and type of the mortgage.

For example, if your mortgage was $500,000 and your broker was paid a 1% commission, they would receive $5,000. This amount is paid by the lender, so you’ll never see the bill.

Generally, lenders will pay brokers an upfront commission when a borrower signs their mortgage contract, but there are other commissions they may pay as well. There are two other common commission structures: trailer and renewal fees.

  • Trailer fees are paid to brokers over time, for as long as the borrower stays with the lender. These will normally be paid in exchange for a lower upfront commission. Trailer fees are intended to disincentivize brokers from recommending regular lender switching, which isn’t always good for borrowers.

  • Renewal fees are paid to the original broker whenever a borrower renews their mortgage with a lender. While this might increase the likelihood of a broker recommending you renew with your current lender, a broker would also get paid if you were to renew with a new lender. It’s always a good idea to compare rates at renewal time, regardless of how your broker gets paid.

    Also read: Renewing your mortgage in 2023: What are your options?

Is it better to get a mortgage from a bank or a broker?

There are pros and cons to using both mortgage brokers and to getting a mortgage from a bank directly. Generally, we recommend you compare rates from a range of both mortgage brokers and mortgage providers in order to get a better understanding of what’s available to you.

Here are some of the differences between getting a mortgage through a broker vs. going to a lender directly:

It’s also worth noting that not all brokers work with all lenders. While most mortgage providers do offer their mortgages via brokers, some only sell mortgages directly.

Are mortgage brokers worth the cost?

In most circumstances, a good mortgage broker should be able to make up for the indirect cost of their commission by finding you a lower rate. Brokers often have access to exclusive rates that are not available on the retail market, and many will give up part of their commission to get you a lower rate.

While it’s impossible to say if getting a mortgage through a broker will be worth the cost of their commission, there’s next to no risk in consulting a broker to see what they can offer. You can consult with a broker for free, with no obligations – this provides a good opportunity to see how useful a broker might be for you.

Other important things to consider

There are a few important things to consider when speaking to a broker.

Ask about trailer fees: Find out if they earn any trailer or renewal fees from a particular lender. While these commissions won’t necessarily stop a good broker from getting you the best deal, they could influence a broker’s recommendation. You need to know if that’s the case.

Your circumstances are important: Remember that your personal circumstances can affect how much help a broker can offer. If you have bad credit, too small a down payment or are locked into a restrictive mortgage contract, it could be hard for a broker to find you a better deal.

The bottom line

A broker’s job is to save you money, and they’re generally effective at doing so. Thanks to Canadian regulations and the importance of referral business, it’s very unlikely a broker will make recommendations against your best interests.

However, it’s important that you understand how commissions work for mortgage brokers to give you the confidence that their recommendations are not affected by financial incentives.

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