Personal Finance

Mortgage brokers: how much do they (you) get paid per mortgage?

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  • Dec 31st, 2012 3:01 am
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[OP]
Jr. Member
Nov 10, 2007
113 posts
6 upvotes
Montreal

Mortgage brokers: how much do they (you) get paid per mortgage?

Hi,

People think that mortgage brokers are free, but of course, nothing in life is free. So, how much do brokers get paid? What is the fee structure? What is the payout schedule? Do brokers get paid a lump sum when they setup a mortgage or do they get a revenue stream % matching the mortgage payment schedule? Do brokers get any more or less when a borrower doubles down on payments, does early lump sum or pay IRD?

What are brokers' incentives? Do they make more from certain lenders compared to others?

I'd like to hear from current and past mortgage brokers, as well as borrowers or lenders who have dealt with them or those who might have some insights.

cheers.
16 replies
Jr. Member
Jul 12, 2010
143 posts
15 upvotes
Ottawa
The fee that I was asked to pay my broker was $800. Also curious what everyone else is paying because I was surprised the fee came from me and not the lender.
Deal Addict
Sep 5, 2009
2945 posts
1118 upvotes
I didn't pay my broker, the lender did.
[OP]
Jr. Member
Nov 10, 2007
113 posts
6 upvotes
Montreal
dgnr8 wrote:
Dec 17th, 2012 11:32 am
I didn't pay my broker, the lender did.
how much? you should care, because whatever your broker was paid, was an amount you might have saved if you had done your own footwork.
Deal Addict
User avatar
Jan 28, 2012
1444 posts
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wasteislander wrote:
Dec 17th, 2012 11:59 am
how much? you should care, because whatever your broker was paid, was an amount you might have saved if you had done your own footwork.
Does it matter though? Brokers seem pretty competitive to the point where they all offer pretty much the same rates. If you feel your broker is taking too much of a cut and not giving you the best rate, just come on RFD and find out if his rates are good or not.

End of the day as long as you get the best rate you can (and that you couldn't have without the broker) then who cares.


I think I found a chart from a lenders broker page online once. Basically the lenders give the broker a discount off of their posted rates, and the broker can choose how much of that to pass on or keep. So just as an example if their posted rate is 3.3% and they give the broker a 0.6% discount to offer to clients, the broker could offer you 2.9% and keep 0.2% as his profit.

At least thats my understanding of how it works. Brokers here on RFD might be able to clarify better than me
Deal Addict
Sep 5, 2009
2945 posts
1118 upvotes
My broker got me a better rate than all of the offers I was able to attract on my own. If I could do the footwork my self and get a better rate, I would. But I couldn't, so I don't mind them getting paid by the lender.
Deal Addict
Jul 11, 2010
1142 posts
219 upvotes
Toronto
Fees paid by a client needs explaining. If you are dealing with a lender and have no credit issues you can be placed with an "A" lender. It does not have to be with a big 5 bank. You get the lowest possible rate and the lender pays a commission or finders fee or whatever you want to call it to the agent/broker directly. The amount does not matter. I think that you can assume that a if you buy a car that the higher the sale price the higher the salesperson's commission.

If you have some credit issues ie a collection or bankruptcy on file or a low credit score you might not able to be placed with a "A: lender so we go to what we call "B" lenders. In these cases you are probably asked for an appraisal of the property. More work has to be done on these files and/or the lender does not pay a full commission so a brokerage fee might be added on. Think of a lawyer who has 2 cases. The one with the more amount of work will be charged a higher fee.

In extreme cases we may have to look at private mortgages. A person is in danger of losing their property for whatever reason or has severe credit issues.. An individual agrees to lend the money usually for a year in an interest only mortgage. An appraisal is done. The private lender usually adds an upfront lender's fee on. In this case the agent/broker receives nothing from the lender and so the client pays these fees also along with the lender's lawyer fees and their lawyer fees.

Also just because 2 agents quote you 2 different rates does not mean that 1 is keeping money for himself. The rate an agent can offer you is based on the rate the lenders offer him. Some lenders have different tiers so that the more business you send them they will give you a lower rate to offer to a client.
Doug Boswell
intelliMortgage Inc. Brokerage #12326
FSCO #MO09002332
Jr. Member
Jul 12, 2010
143 posts
15 upvotes
Ottawa
dougboswell wrote:
Dec 17th, 2012 12:40 pm
If you have some credit issues ie a collection or bankruptcy on file or a low credit score you might not able to be placed with a "A: lender so we go to what we call "B" lenders. In these cases you are probably asked for an appraisal of the property. More work has to be done on these files and/or the lender does not pay a full commission so a brokerage fee might be added on. Think of a lawyer who has 2 cases. The one with the more amount of work will be charged a higher fee.
This is what happened with me due to complex credit issues; so I had to pay a fee. But I don't mind since he did alot of work and was able to acquire a mortgage at an excellent rate due to the work he put into my file.
Member
Oct 28, 2008
265 posts
15 upvotes
Courtenay
wasteislander wrote:
Dec 17th, 2012 11:59 am
how much? you should care, because whatever your broker was paid, was an amount you might have saved if you had done your own footwork.
Brokers are another arm of a lenders marketing plan. For a bank it means they have someone that they can compensate solely for bringing them a client with no real overhead costs. To attract clients, a bank can pay for advertising, salaries, the brick and mortar, or they can pay a broker. They will never breakout the costs...rates are lowered when the client is attractive and well informed
Deal Addict
Nov 14, 2005
1188 posts
149 upvotes
Toronto
As has been mentioned above for A deals my client pays nothing as the bank/lender will pay a commission. This commission depends on the following factors

1) How much business I send the lender (volume)
2) Length of the Mortgage
3) Funding Ratio with lender (how many of my deals actual are approved and funded)
4) Was the rate bought down (ie I can make less $$ and reduce the rate to my client)
_______________
Shawn Stillman, CA, CPA Mortgage Broker
Mortgage Outlet Inc. 12628 (FSCO - Ontario), X300374 (FICOM - BC), MW-1411078 (RECA - Alberta)
Jr. Member
Mar 18, 2007
125 posts
2 upvotes
I notice no one is actually providing numbers...
Deal Addict
Jul 11, 2010
1142 posts
219 upvotes
Toronto
Redmen62 wrote:
Dec 29th, 2012 9:06 pm
I notice no one is actually providing numbers...
Please reread Shawn's comments above. The actual amount that a mortgage agent gets also depends on their split with with their broker. It could be a 50-50 or a 75-25% split. I am not sure why people are concerned with a "number". If you are a client with excellent credit you will get the lowest possible rate that the agent can give you at no cost to you. That being said another agent with a different company may get you a different rate (higher or lower) based on 1, 3 and 4 in Shawn's list above.
Doug Boswell
intelliMortgage Inc. Brokerage #12326
FSCO #MO09002332
Jr. Member
Mar 18, 2007
125 posts
2 upvotes
I read (and re-read) Shawn's comments above, thank you.

People are concerned with how much the lender pays the mortgage broker because banks take into account the money they have to pay to brokers when calculating their profitability on a loan. The money paid to a broker doesn't come from thin air; it is money out of the "pot" to be split between lender, borrower, and broker.

More importantly, I don't think it's unreasonable for customers to ask questions about how brokers are paid. In my province, for example, real estate agents have to set out, in writing, how they are compensated. They have a duty to tell their client if they receive any payment or incentive from a third party.

Information is power. Buyers are taking on loans worth hundreds of thousands of dollars. It is the most important financial decision most people will ever make. Why shouldn't customers know how their brokers get compensated?
Deal Addict
Jul 11, 2010
1142 posts
219 upvotes
Toronto
Redmen62 wrote:
Dec 29th, 2012 10:44 pm
I read (and re-read) Shawn's comments above, thank you.

People are concerned with how much the lender pays the mortgage broker because banks take into account the money they have to pay to brokers when calculating their profitability on a loan. It is money out of the "pot" to be split between lender, borrower, and broker.

More importantly, I don't think it's unreasonable for customers to ask questions about how brokers are paid. In my province, for example, real estate agents have to set out, in writing, how they are compensated. They have a duty to tell their client if they receive any payment or incentive from a third party.

Information is power. Buyers are taking on loans worth hundreds of thousands of dollars. It is the most important financial decision most people will ever make. Why shouldn't customers know how their brokers get compensated?
We too have to provide in writing to a client whether we are receiving any other money or incentives from a third party. Ontario has a set disclosure document that a client is provided with.

When a client signs with a bank does the bank representative tell the client how much they are being paid? I have never experienced that personally. The bank has to pay for staff commissions or salaries plus the cost of the bricks and mortar. Lenders who only deal through agents don't have the brick and mortar costs and usually can offer very competitive rates which certainly benefits the client.

I agree with you regarding it is probably the client's most important decision. We do tell them in writing how we are paid. This is why we research different lenders to get them the best rates and conditions. This was your statement regarding how their agent gets compensated. If a client asked me I would tell them how much I would receive. To date I have never been asked this
Doug Boswell
intelliMortgage Inc. Brokerage #12326
FSCO #MO09002332
Deal Addict
Nov 14, 2005
1188 posts
149 upvotes
Toronto
Redmen62 wrote:
Dec 29th, 2012 9:06 pm
I notice no one is actually providing numbers...
Over the past year my commission ranged from 0.2% to 1.6% depending on the factors I listed above. Keep in mind that this also depends on the split you have with your broker.
_______________
Shawn Stillman, CA, CPA Mortgage Broker
Mortgage Outlet Inc. 12628 (FSCO - Ontario), X300374 (FICOM - BC), MW-1411078 (RECA - Alberta)

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