Residential mortgage brokers
Looking to buy a property or refinance your current one? You have two choices: you can either shop around for a mortgage loan on your own or deal with a mortgage broker.
Get a head start: find out how long it takes to get a mortgage loan. If you start too late, you may not get your loan in time and end up paying costs you hadn't anticipated.
What is a mortgage broker?
A mortgage broker acts as an intermediary between you and potential mortgage lenders (usually financial institutions).
Why deal with a mortgage broker?
A mortgage broker will look for a mortgage loan that, based on factors like the interest rates and features of the loans offered by mortgage lenders, suits your goals and financial situation.
After analyzing your situation, a mortgage broker may recommend you not enter into a loan if you’re not in a financial position to do so.
How are mortgage brokers paid?
Mortgage brokers are required to provide you with written disclosure of how they are remunerated for their services—that is, whether by you or by the lender.
A mortgage broker’s services are usually paid for by the lender, in which case the mortgage broker must tell you, for example, that they will receive a commission (a fee based on the amount borrowed) from the mortgage lender if you get the loan proposed by the broker. The mortgage broker must also disclose any other benefits they may receive (e.g., a bonus).
The remuneration a mortgage broker receives is based on the amount borrowed and the termIt is the term of a mortgage contract, which is usually between six months and five years. of the mortgage loan.
When a mortgage broker asks you to pay fees (remuneration) for the services they provide (e.g., a fixed amount or a percentage of the loan amount), they must also provide you with written disclosure of the amount requested and payment terms (e.g., when or the terms on which payments are to be made). The amount charged must be fair and reasonable for the services provided.
To ensure you fully understand their remuneration, a mortgage broker must provide whatever explanations you need.
Don’t hesitate to ask questions! Request that explanations be provided in writing!
Mortgage brokers must at all times be able to:
- propose loans from several lenders and provide some of their names to give you an idea of the types of lenders they deal with.
They must also disclose in writing:
- the number of lenders with which the mortgage broker and the firm on behalf of which the mortgage broker acts have done business in the previous 12 months
- if a particular lender accounts more than 50% of the total number of mortgage loans or renewals made in the previous 12 months through the mortgage broker and firm
Don’t hesitate to ask for clarification about the number of proposals you can obtain.
End of the warningYou want to deal with a mortgage broker?
A mortgage broker will explain what they can do for you. The broker will ask you questions to get a better idea of your needs and financial situation. Examples of questions you may be asked include:
- Why do you want to apply for a mortgage?
- If you’ve already chosen the property you would like to buy, what area is it in?
- When will you need a mortgage?
- What assets and debts do you have?
- What is your employment situation (are you an employee or self-employed)?
- Have you ever had any credit problems?
- If you’re applying for refinancing, what is the approximate value of your property and what’s your mortgage balance?
Are the firm and the person you’re dealing with authorized to act as mortgage brokers?
To find out, check the Register of firms and individuals authorized to practise or call the AMF Information Centre.
End of the insightDepending on your needs and the lenders’ requirements, the following are the types of documents you may be asked to provide:
- 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 broker needs your authorization to view your credit report.
The broker will then be able to identify one, two or three potential lenders, depending on your situation and goals. They are required to explain how the loan suits your needs. They are also required to discuss the loan terms and conditions with you, including the term over which you wish to repay your mortgage, the mortgage’s features, the penalties for breaking your mortgage, and the interest rates. After you’ve chosen the lender and product that are right for you, the broker will forward the information and mortgage application to the lender, which will determine whether you qualify for the loan. The broker will help you if the lender asks for additional information.
If you qualify, the lender will usually send the final approval to the broker, who will then give it to you.
Penalties for not accepting the financing proposed by the broker
The agreement you enter into with the broker may stipulate that your broker will charge a fee (remuneration) for their services if you refuse the financing offered by the broker and do not provide adequate justification. You undertake, usually for the term of the agreement, not to get a mortgage loan on your own or through someone other than the broker you are dealing with. The broker may refer to this as the exclusivity clause or penalty.
Brokers who charge such a fee must disclose the fee to you in writing before you agree to retain their services. They must explain it clearly and make sure you understand what it involves.
Feel free to ask the broker questions about this clause and any other aspects of the contract. You need to understand exactly what you are agreeing to.
Once accepted, the agreement may result in your having to pay a certain amount (for example, 1% of the amount of the loan you are looking for) if you do not go through the broker to get a mortgage.