Even though a mortgage broker doesn’t charge you a fee, they are paid a one-time commission by the lender. So in a way, they do charge a fee, but it doesn’t come out of your pocket.
Mortgage Broker Fees
The commission they make depends on the service being offered. Each different type of currency lending would have a different commission amount. For example, a lender would pay a better commission on a 10-year mortgage than they would a 5-year mortgage.
Trailer fees are common for financial advisers, but are only starting to catch on for mortgage brokers. A trailer fee means the broker will collect a lower commission when the mortgage is signed, but then earns a trailer fee of say 0.15% from the lender every year for the life of the mortgage. This gives them an advantage because they have ongoing revenue instead of collecting a lump sum upfront.
Some advantages of working with a mortgage broker would be that they have more connections. They work with several banks, instead of just working with your one bank. Banks can sometimes not have the best offer, so if you decide to go with a bank, do not be afraid to shop around for mortgage prices and rates before going back to your bank to negotiate their rates. Most people do not like to bargain or haggle, which is where a Mortgage Broker would come in handy because they do the bargaining for you. It’s important to know your options because saving even one percent off your interest rate could save you thousands.
At Team Jardine, this is how we work. We don’t charge any brokerage fees.
Mortgage Broker Fees Apply
Some places will charge mortgage broker fees, but those fees should be disclosed before you sign your agreement. Don’t be afraid to ask their rates and get an explanation for them. Understanding your mortgage and rates it just as important, if not more important, then getting the mortgage itself. There are a lot of factors as to why they charge a fee. Some of these examples include commercial mortgages, small loans, and private mortgages. In BC it is illegal for a broker to ask for a fee upfront on a residential mortgage. So it really does depend on the situation or even the province. However, mortgage brokers won’t get paid, if the deal doesn’t go through. So if you are talking with them for a month, and the bank suddenly declines, not only will you be out of a mortgage but your mortgage broker will be out of a paycheck.
At Team Jardine, we understand that investing in a mortgage and preparing to become a home-owner can be extremely stressful. We want to make sure that you feel valued and understand every aspect of your mortgage and answer any questions you have. Contact us today with any questions you may have!