How do mortgage brokers get paid in Canada?

Mortgage brokers in Canada are usually paid a commission by the lender once your mortgage closes, so the borrower typically pays nothing directly. The commission is generally a percentage of the mortgage amount. Some situations, such as certain private lenders, can involve a borrower-paid fee.

How the lender-paid commission works

The lender whose mortgage you proceed with pays the broker, so a broker only gets paid when a mortgage goes ahead.

You don't receive a bill, and your interest rate isn't raised to cover the commission. The amount varies slightly from lender to lender and is usually a percentage of the loan amount.

Most lenders pay about the same amount, which reduces the incentive for a broker to steer clients toward one lender over another.

Typical commission ranges in Canada

The typical lender-paid commission in Canada is roughly 0.5% to 1.2% of the mortgage amount. Brokers can also receive up to an extra 0.3% in volume bonus or trailing commission, based on the total volume they send to a lender.

Commission comes in two forms:

• Upfront commission: a one-time payment when the mortgage closes.
• Trailer commission: a payment made on an ongoing basis, such as monthly, annually, or at renewal.

Be careful with figures from the United States. Some U.S. guides cite commissions of 1% to 2% and say either the borrower or the lender can pay. Those numbers come from a different system, so don't use them to estimate Canadian costs.

Worked example: what a commission looks like

Apply the 0.5% to 1.2% range to a $500,000 mortgage:

• At 0.5%: $2,500
• At 1.2%: $6,000 ($500,000 x 0.012)

The lender would pay a commission of about $2,500 to $6,000 at closing. This illustrates the published range and isn't a quote from any lender or broker.

The commission isn't added to what you owe.

When a borrower might pay a fee

Lender-paid commission is the usual arrangement, but not the only one:

• Some private lenders don't pay brokers a commission, so a broker's fee may be charged to the borrower.
• Loans under $450,000 and complex files, such as some self-employed applications, can carry a fee because the lender commission may not cover the work involved.
• Borrower-paid broker fees can range from 0.5% to 2% of the mortgage amount.

In Ontario, a broker must tell you about all fees up front, before an agreement is signed.

Renewals, refinances and what to ask

Renewing directly with your current lender usually doesn't pay the broker. Refinancing or moving to a new lender may earn a new commission.

Before you sign, ask any broker or agent these questions:

• How are you paid on my specific file, and by whom?
• Does any fee apply to me? If so, how much?
• Can I have every fee in writing before I sign anything?
• Is there a trailer commission, and how does it apply to my file?

Lender availability depends on your application and current lender guidelines, and no approval is guaranteed. Apex Mortgage Group works with recognized Canadian lenders in Ontario.

FAQ

Does a broker get paid if my mortgage doesn't close?

Commission-based pay generally follows the mortgage being completed, so a broker typically isn't paid for a deal that doesn't go ahead.

Do trailer commissions raise my cost?

Trailer commissions are typically paid by the lender, not billed to you. Ask your broker how any trailer commission applies to your file and whether it affects what you pay.