What is a Mortgage Broker?
A mortgage broker is an intermediary between a lender and a borrower. They essentially work to connect borrowers to lenders that are willing to provide the borrower with a mortgage loan.
While lenders such as banks can only offer the products that they develop and sell, mortgage brokerages can access the mortgage rates of multiple lenders to present the best option to borrowers. In the last 15 years, as property markets have drastically grown, the prevalence of the mortgage broker has grown too as borrowers try to secure the best mortgage option and lowest rates available to them. There are several advantages to working with a mortgage broker. Most notably, they can negotiate the lowest rate for the borrower and allow for a quick comparison of pricing, mortgage rates, terms and other features across mortgage providers.
In 2019, a survey conducted by the Canada Mortgage and Housing Corporation (CMHC) showed that mortgage brokers originated (i.e. found a prospective borrower needing a mortgage and connected them with the lender and/or product that eventually provided the loan) 47% of the total mortgages funded across Canada. For perspective, this number was just 1 in 4 in 2003. But that is essentially what the mortgage broker exists to do. They can provide you with assistance across all phases of the mortgage process from pre-approvals to appraisal and closing. However, it is pertinent to remember that they do not directly extend or administer the loan. The loan is still owned and serviced by the bank or lender.
In most cases, the borrower does not have to pay a fee as the lender that the borrower eventually obtains a loan from will pay the mortgage broker a direct commission for originating the loan for them. For the most part broker fees are only charged to a borrower if they can not qualify with one of the many A lenders we work with and their mortgage can only be funded by an alternative mortgage lender or private mortgage lender since those types of lenders typically do not pay the mortgage broker directly. Broker fees are also charged to commercial mortgage borrowers for all commercial mortgage and commercial lending transactions because even A lenders do not pay brokers for brokering commercial mortgage loans.