When using a mortgage professional or broker it is very important to understand how your mortgage will work, if there are any associated fees, what your Mortgage Interest Rate is, and that Mortgage Life & Disability Insurance is available.
Each application is unique as is each borrower's situation. We have each borrower sign a disclosure form that identifies some key information. What a Mortgage Broker is, what the relationship is between a broker and client and some very specific information about your individual situation. Your pre-payment privileges, Risks associated with a fixed or variable rate mortgage (if applicable) all other details about your mortgage what your Mortgage Rate is, What your APR is if applicable If your mortgage is assumable, portable, or transferable. Below you will find a sample of our disclosure.
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While each mortgage is different, we will outline some of the differences below:
There are three classifications of Interest Rates -
1). Insured: A mortgage that insured by CMHC/Genworth/Canada Guarantee - Typically these mortgages rates are for but not limited to borrowers who do not have 20% or more for a down payment.
2). Insurable: Typically the mortgage rates are for mortgages who have 20% equity and have a mortgage amortization of 25 years or less.
3). Uninsured: This mortgage rates are for mortgages that have an amortization greater than 25 years.
Within these three classifications you can have a fixed rate or variable rate from a 6month term all the way up to a 10 year term. Each individual bank, credit union or lender will set their own interest rate policy. It is your mortgage professional's job to find you the best mortgage for your unique situation. Please refer to our interest page for a list of current rates.
Brokerage Fees & Compensation:
Mortgage brokers typically do not have to charge you any fees. However, there are times when that may be necessary. Fees are based on the application themselves. We will illustrate them below:
1) Finders Fee: This is the most typical way a mortgage professional gets paid. A lender will generally pay a mortgage broker a percentage of the mortgage amount as a finders fee. The amount of the fee can range from 0.5% to 1.5% with the average being about 1%. For example if a client was to borrow $300,000.00 - A mortgage professional would likely receive 1% or $3,000.00 as their finders fee.
2). Lender Fee: Some lenders charge their own fee on top of the mortgage. These lenders usually specialize in borrowers who have bruised credit, or their applications require special exceptions. These lenders will charge a fee of 1%-3% and pay the mortgage professional a portion of that fee (usually 50%).
3). Broker Fee: Sometimes a mortgage broker will need to charge a fee if they are using a private lender or a financial institution that doesn't have a finders fee agreement with the brokerage. For example a major bank, credit union, mortgage investment corporation or private corporation. These fees are set by the broker and agreed upon by the client. Typically fees are between 1%-3% and have a minimum of usually $2,500.00. If a broker/brokerage fee is charged, it will be fully disclosed upfront on the borrower's disclosure.
4). Cash Back: Many lenders have a cashback program for their clients. Cashback is also a way that the mortgage professional can receive compensation in lieu of a lender fee or broker fee. In this case, the lender will pay the broker 1% of the funded mortgage amount and increase the rate to the borrower by .2% or .25% depending upon their policy. The increase in the interest rate is what compensates the broker and is paid over the term of the mortgage. With this type of mortgage, it is important to understand that the mortgage penalty will be higher.