A common question that clients have is how does a mortgage broker get paid?  There is a very big misconceptions that mortgage brokers always charge a fee.  This is rarely the case.  There are instances where we do, but over 90% of the time we are paid directly from the lender.

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 minumum of usually $2,500.00.  If a broker/brokerage fee is charge, it will be fully disclosed upfront on the borrower 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% – .3% 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

If you have more situations about your own situation contact us!

A Mortgage Broker Is Going To Give You The Best Mortgage That Meets Your Needs & Potentially Save You $1000s Of Dollars In Unnecessary Fees & Interest.

As Mortgage Brokers, we strive to educate consumers, REALTORS and all other Real Estate Professionals as to what a Mortgage Broker does.  As we are all independent professionals, I think you’ll find many different approaches to the business.   This is what we do a Peter Paley & Associates.

• We educate our clients about all of the different mortgage products.   Standard mortgages, collateral mortgages, no-frills mortgages, home equity lines of credit etc.
• We educate our clients about individual lender products from all of our major lenders, Manulife One, Scotia Step, MCAP Valu-Flex and many others.
• We review your mortgage application with the utmost respect and detail to see if there are any challenges that may unknown to the client.
• We review our client’s credit bureau report and score line by line and ensures it meets our lender’s standards.
• We verify our client’s income upfront via documents that we request.
• We look for extra qualifying income (bonus, Canada Child Benefit, over-time, self employed income, investment income, child/spousal support, etc).
• We verify our client’s down payment and ensure that it is eligible (savings, gifted funds, RRSP, TFSA, borrowed funds).
• We ensure our clients comfort level in terms of monthly payment to help them identify a target purchase price so that the mortgage payment, interest, taxes and other expenses fit their budget.
• We provide the maximum lending amount.
• We help consolidate debt and draw on existing home equity in the case of a finance
• We provide excellent mortgage life and disability insurance and term and whole life insurance advice.
• We can provide retirement planning advice with investments and investment property strategies.
• We work non-standard hours to ensure our clients get the best customer service.
• We communicate with your REALTOR, Lawyer and other industry partners to ensure that all the details are well looked after.
• We can help people with bruised credit, past consumer proposals or even bankruptcy get back on track.
• Best of all we can usually beat any bank or credit union mortgage rate with better terms!

We are an advice based mortgage team with access to hundreds of different mortgage products and programs that your bank or credit union may not have access to.   We would be happy to have a chat to see if using a mortgage broker would be right for you!

What will the real estate industry look like in 2021?

If there is one word that defines life in 2021, that word is change. How much and for how long is uncertain. And while some changes may be temporary, many may be here to stay.

How will all of this change impact the real estate industry? Some key trends have emerged that bear closer scrutiny.

RESIDENTIAL REAL ESTATE

With more and more people working from home and the potential of many continuing to do so in a post-pandemic world, there is an increased need for more space. Enter suburbanization. Residents living in major urban centers are steadily moving to suburbia. Will suburbs become 18-hour cities? Who knows? One thing is certain, living cheek to jowl with thousands of other people is no longer a viable option for many.

OFFICE SPACE

For a while now, open-concept office space was the trend. That trend is now dead. While it allowed companies to downsize to smaller properties since less space was needed, after COVID-19, once workers begin to return to the office, we may see a return to traditional working spaces and the need for larger office buildings to accommodate them.

RETAIL SPACE

Bricks and mortar businesses have been hit hard and have seen a sharp decline in sales. Many big-name brands that previously anchored large retail spaces have permanently shut their doors. What does this mean for shopping malls? Will they survive? Experts suggest that to do so, they will have to be creative and embrace change. Think more medical clinics and multi-family residential homes rather than clothing stores with multi-user fitting rooms.

PROPTECH (PROPERTY TECHNOLOGY)

The real estate industry was on the brink of widely embracing proptech before the pandemic hit. That acceptance has accelerated like a rocket. In order to stay engaged with customers, service their needs and remain in business, companies have been forced to innovate in order to survive. This embrace of innovation will help to stabilize many sectors once the pandemic is behind us.

Published by FCT