Many Ottawa buyers wonder how a mortgage broker can be “free.” The answer is that the lender covers the cost of bringing them a borrower, much like it would spend on marketing or branch staff. Here is how compensation usually works and what to ask.
How brokers are paid
| Type of mortgage | Who usually pays |
|---|---|
| Prime mortgages with banks, credit unions or monolines | Lender pays the broker, and the borrower typically pays no fee |
| Alternative (B) lender mortgages | Borrower may pay a broker fee, and the lender may charge a fee |
| Private and second mortgages | Borrower usually pays broker and lender fees |
| Commercial mortgages | Depends on the deal. Fees may be paid by the borrower, the lender or both. |
What Ontario rules require
In Ontario, mortgage brokerages and brokers are licensed by FSRA and must follow disclosure rules. That includes telling you about fees and how they are compensated, especially when a fee is charged to you. Ask for the disclosure in writing, and keep copies. Verify the licence on the FSRA website.
Questions to ask before you proceed
- Will I pay any fee to you or the lender? How much and when?
- How are you compensated on this mortgage?
- Do you receive different compensation from different lenders?
- What happens if the mortgage does not close?
- Can I have this in writing?
Does the broker’s pay affect the advice?
Brokers may earn different amounts from different lenders. That is why it is worth asking why a particular lender is recommended and comparing the cost of alternatives. A good broker should be able to explain the trade-offs clearly.
Related: mortgage broker vs bank and how to find and verify a broker.
Frequently asked questions
Is it cheaper to go directly to the bank?
Not necessarily. The lender’s cost of paying a broker is generally not added to your rate, and brokers can often find lower rates. Compare both.
Can I negotiate a broker fee?
If a fee applies, you can ask about it, especially on larger commercial deals. Get the terms in writing before you agree.
What if I was charged a fee I did not expect?
Ask the brokerage for the disclosure you were given, and contact FSRA if the issue is not resolved.
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Get matched nowImportant: Ottawa Mortgages is an independent information and referral service. We are not a lender, mortgage broker or mortgage brokerage, and we do not give mortgage advice or make credit decisions. If you ask to be connected, your details may be shared with a licensed Ontario mortgage professional, who may compensate us. Rates, rules and eligibility change often. Confirm details with a licensed professional and official sources, and check any Ontario mortgage broker’s licence with FSRA. Read our full disclosure.