What Does a Mortgage Broker Do?
A mortgage broker is a mortgage specialist who has been licensed by the province. Mortgage brokers operate for mortgage brokerages and have access to a broad network of Canadian mortgage lenders, allowing them to help you get the best mortgage for your needs.
Mortgage brokers have access to several smaller lenders, such as First National, MCAP, and Equitable bank, as well as private mortgage lenders, in addition to the six large banks of RBC, TD, Scotiabank, BMO, CIBC, and National bank.
They curate a network that allows them to effectively assist you with all of your mortgage needs and help you find the lender you are looking for.
How Does a Mortgage Broker Help?
1. Assistance with Mortgage Approval Process
Mortgage brokers can also help with the mortgage application and pre-approval procedure. The mortgage broker discusses the terms, conditions, risks, costs, and features of your mortgage with you. Your mortgage broker will submit the application documentation to the lender on your behalf and will assist you with the mortgage closing procedure.
Individuals who lack basic financial understanding, encounter language hurdles, or are first-time house purchasers with little expertise in the mortgage procedure may find these services particularly beneficial.
2. Low Mortgage Rates & Terms
All of the lenders’ rates and requirements are available to mortgage brokers. Mortgage brokers may negotiate with lenders and may offer mortgage buydowns based on your financial condition to get you the best interest rate on your mortgage. Because the mortgage broker evaluates rates from many lenders on your behalf, the customer saves time. When it comes to the terms of a mortgage, it good to have someone that can translate the complicated language and ensure that the mortgage you are choosing is right for you.
3. Individuals with a Unique Financial Situation
Mortgage brokers assist clients with unique financial conditions in obtaining mortgages. Individuals seeking a self-employed mortgage, as well as those without a steady income or a non-existent or low credit history, may fall into this category. Mortgage brokers also assist first-time home buyers with the application procedure.
4. Offering very competitive rates by offering mortgage buydown
Almost all mortgage lenders including debt consolidation mortgage broker in Canada work with mortgage brokers, and they always negotiate the best mortgage rates. Some of them, however, might give a rate that is lower than their best available rate by offering the borrower a portion of their own commission. Mortgage brokers typically receive a commission of 0.8 percent to 1% for a standard 5-year fixed mortgage without buydowns.
Mortgage Brokers vs Banks
According to the CMHC’s 2019 mortgage consumer survey, mortgage purchasers were satisfied with the services of both banks and mortgage brokers, and the level of service and interest rate offered were the two key factors in deciding whether to go straight to the banks or to mortgage brokers.
Mortgage stress tests are also required by federally regulated lenders, such as banks, to evaluate if you can make your mortgage payments. B Mortgage stress tests are not required by lenders, credit unions, or private lenders.
You will have more flexibility and possibilities if you go through a mortgage broker; but, you will not need a mortgage broker to reach out to lesser-known lenders. You may be able to contact many small lenders who do not have a physical branch by calling them directly.
In addition, most mortgage buyers should contact three lenders and two brokers when looking for a mortgage. Shopping around with a variety of lenders and brokers will help you not only locate the greatest interest rate, but also the best mortgage plan for your financial position.
Mortgage Broker vs. Mortgage Agent
While both mortgage agents and brokers work with mortgages, the primary distinction is that a mortgage broker employs mortgage agents, implying that mortgage agents work for a mortgage broker.
Both mortgage brokers and mortgage agents have the same lenders available to them. Mortgage brokers are in charge of overseeing their mortgage agents. Brokers and agents have separate licensing requirements and licenses.
The terminology used varies by province. Mortgage brokers are known as sub-mortgage brokers in British Columbia. Brokers also have different requirements for each area, such as mortgage brokers in Ontario must have at least two years of experience.
Mortgage Broker Commissions
The commissions paid by mortgage brokers range from 0.5 percent to one percent. As a finder’s fee, the mortgage lender pays this compensation to your mortgage broker or agent. You won’t be able to get a lower rate if you go straight to the lender and avoid the broker.
Mortgage brokers often do not charge their clients any fees because the commission is paid by the mortgage lender. Mortgage broker fees are often only charged for difficult-to-find mortgages, such as private mortgages.
Because these commissions are integrated into the mortgage rate, certain mortgage brokers who provide “buy downs” can lower your mortgage rate or favorable term even more by giving you a percentage of their commission.
Consider a major bank that is offering a 1% commission on a mortgage to see how much a mortgage broker or agent might make. A potential borrower approaches a mortgage broker in search of a $500,000 loan. The bank will pay the broker 1% of the mortgage amount after the borrower is authorized for a mortgage with that large bank.
The mortgage brokerage receives this commission. A mortgage agent typically receives 15% of the total commission, or $750, if you worked with them.
Mobile Mortgage Specialists
Bank personnel known as mobile mortgage specialists work in a similar capacity to mortgage consultants. Mobile mortgage specialists are compensated based on the number of sales they produce. Mortgage specialists differ from mortgage brokers in that they can connect you to other lines of business offered by the bank, such as credit cards, savings, and retirement accounts.
Mortgage specialists, unlike mortgage brokers, can only sell products from their own bank, whereas brokers can connect you with a selection of mortgage lenders and banks.
You can often meet a mobile mortgage specialist outside of typical banking hours, such as in the evenings or on weekends because they have flexible working hours that they determine for themselves. Instead of forcing you to visit a branch, mobile mortgage consultants will come to you.
TD’s mobile mortgage specialists work from home, but they also collaborate with a team and use the company’s sales management system. This allows TD’s mobile mortgage specialists to start their own company under the TD brand.
Mortgage Broker Regulations
The real estate market in Canada is governed by provincial regulatory organizations. The Mortgage Brokers’ Regulatory Council of Canada (MBRCC) is a platform for provincial regulators to collaborate and coordinate regulatory procedures across the country. With the exception of Prince Edward Island, the MBRCC is made up of nine provinces.
Quebec Mortgage Brokers
The Autorit des marchs financiers regulates mortgage brokers in Quebec. Before becoming a qualified mortgage broker, individuals must pass four stages of certification. Mortgage broker training, professional practice and ethics training, and relevant tests are all included.
Ontario Mortgage Brokers
Mortgage brokers in Ontario are regulated by the Financial Services Commission of Ontario (FSCO), which has since been incorporated into the new Financial Services Regulatory Authority of Ontario (FSRA). Mortgage brokers practicing in Ontario should have an FSRA license.
All marketing materials and promotions must include their licensed name and license number. The Mortgage Brokerages, Lenders and Administrators Act of Ontario does not protect you if you get a loan from an unregistered mortgage broker.
Private mortgage lenders are not required to be regulated, but they are prohibited from advertising to the general public. Licensed mortgage brokers are allowed to place advertisements on their behalf. Before completing a mortgage deal with a mortgage broker, Ontario mandates a two-day cooling-off period. This allows you to thoroughly review your contract and its terms.
British Columbia Mortgage Brokers
Mortgage brokers in British Columbia are regulated by the BC Financial Services Authority (BCFSA). Private mortgage lenders who loan more than 10 mortgages each year must also be licensed as mortgage brokers under the Mortgage Brokers Act.
Anyone who solicits anyone to borrow or lend money backed by a mortgage, or wants to negotiate a mortgage on behalf of an individual must hold a license with RECA, according to the Real Estate Council of Alberta (RECA).
Questions to Ask a Mortgage Broker
Some mortgage brokers deal with a limited number of lenders, offer limited services, or demand additional fees. Ask if they charge a premium, if they are reimbursed by lenders for referrals, how many lenders they deal with, and what products they will provide when picking a mortgage broker.
This should ensure that you use a mortgage broker who is a good fit for your needs and who will protect your interests.