Residential mortgage broker

Whether you’re looking to buy a home or refinance your current property, two options are available to you: shop for a mortgage loan on your own or use the services of a mortgage broker. Here’s what you need to know if you opt for a mortgage broker.

Act early to avoid unexpected costs

Learn about the time frames and process for obtaining a mortgage loan.

By getting an advance start, you are more likely to obtain a loan in time and less likely to incur unexpected costs.

Understanding the mortgage broker’s role

The mortgage broker acts as an intermediary between you and mortgage lenders (usually financial institutions). The mortgage broker will look for mortgage options suited to your goals and financial situation, taking into account such things as interest rates and other features of loans offered by different mortgage lenders.

After analyzing your situation, a mortgage broker may advise against taking on a mortgage loan if you can’t afford it because of your financial situation.

Dealing with a mortgage broker

Understand what services the mortgage broker can offer you

Mortgage brokers are required to explain the nature and scope of their services to you so you can understand their role and what they are agreeing to do for you.

Find out which lenders the mortgage broker does business with

Mortgage brokers must be able to:

propose loans from several lenders
provide the names of some of the lenders in order to give you an idea of the types of lenders they deal with

They must also disclose in writing:

the number of lenders the mortgage broker or the firm they act on behalf of has done business with over the previous 12 months
if, in that same period, a particular lender accounted for more than 50% of the total number of mortgage loans or renewals made through the mortgage broker and firm

This information will tell you what types of loans they can offer you. Ask how many proposals you can obtain.

Find out how the mortgage broker is remunerated

Before providing services to you, mortgage brokers must explain how they are remunerated to you in writing. Mortgage brokers are required, for example, to disclose whether they will receive a commission from the lender or will be paid by you for their services. They are required to also disclose any other benefits they may receive (e.g., a bonus) if you accept a mortgage loan they propose.

The information and explanations provided should allow you to understand whether the services are to be paid for by you, how much they will cost, and how and when you are to pay for them.

Feel free to ask questions and, when necessary, request to have things explained in writing!

Be prepared to answer the mortgage broker's questions

The broker will ask you questions to clearly understand your needs and financial situation. Here are some examples:

Why are applying for a mortgage loan?
What area is the property you would like to buy located in?
When will you need the mortgage loan?
What is your financial situation? What assets and debts do you have?
What is your employment status? (are you employed by someone or are you self-employed)?
Have you ever had any credit problems?
What is the approximate value of the property the loan is for?
How much do you want to borrow?

Depending on your needs and lenders’ requirements, you may also be asked to provide documents such as:

proof of employment and income
your bank and investment statements
the municipal and school tax accounts for the property you want to purchase
the promise to purchase
the certificate of location

The mortgage broker may also ask you for authorization to verify certain information, such as credit report.

Make sure the broker clearly understands your needs

The information you provide will be used by the mortgage broker to identify the best financing solution for you or point you towards other options if no mortgage financing seems appropriate for you.

The mortgage broker may propose one or more suitable solutions and must explain how they meet your needs. The broker also must explain the loan features so you can anticipate the loan costs and be aware of any potential penalties, if, for example, you decide to pay the loan off before maturity or you stop making payments.

Insight

Are the firm and the person you want to deal with authorized to practise in the mortgage brokerage sector?

Find out by checking the Register of firms and individuals authorized to practise or calling the AMF Information Center.

When introducing themselves, mortgage brokers are required to give you their contact information and either inform you that they are acting on their own behalf or tell you the name of the firm on behalf of which they are acting.

End of the insight

Finalize your mortgage loan application

After you’ve chosen the lender and product you want, the broker will forward the information and mortgage application to the lender. If the lender asks for additional information, the broker can help you send it.

If the lender accepts your loan application, the lender will usually send the final approval to the broker, who will then deliver it to you.

Understanding your agreement with the mortgage broker

You may be charged a fee if you do not go with one of the financing options proposed by the broker. This means that, for the duration of the agreement, you will not be allowed to get a mortgage loan on your own, through a third party or through another broker. Brokers often refer to this type of undertaking as an exclusivity clause or a penalty.

The broker must inform you in writing if you can expect to pay fees. The broker must explain and make sure you clearly understand the fees.

Feel free to ask questions about the exclusivity clause and any other aspects of the agreement you find unclear. You need to understand all the implications.

If you accept the agreement, you may have to pay a certain amount (for example, 1% of the amount of the loan you are considering) if you don’t finalize a mortgage loan with the broker.

Warning

Mortgage brokers and loaning money

Mortgage brokers may not, for any reason or under any circumstances, loan you money—not even if you’re going through financially difficult times. If they did, it would put them in in a conflict of interest. Additionally, mortgage brokers who are also mortgage lenders are not allowed to act as both for the same client.

End of the warning