Residential mortgage brokers
You want to purchase or refinance a property? You need to renew your mortgage? You have a choice: you can shop around for a mortgage on your own or deal with a mortgage broker. A broker will analyze your financial situation and needs in order to help you find a mortgage loan that’s right for you.
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?
Mortgage brokers know the lenders’ mortgage product lines. They look for a mortgage loan that, based on such factors as its interest rate and features, suits your goals and financial situation.
After analyzing your situation, the mortgage broker may recommend that 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 usually paid by the lender. The nature of such remuneration or any other benefit the mortgage broker may receive (e.g., a bonus) if you obtain the loan must be disclosed to you in writing by the mortgage broker.
In general, brokers are paid after the transaction has been notarized. The remuneration they receive 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.&nb of the mortgage contract.
Be aware!
Mortgage brokers must at all times be able to:
- propose loans from several lenders
- tell you the number of lenders with which they and the firm on behalf of which they work have done business during the previous 12 months
- let you know when a particular lender accounts more than 50% of the total number of mortgage loans or renewals made through them in the previous 12 months.
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?
Initial contact with a mortgage broker is often by phone or e-mail. The broker will explain what he or she can do for you and provide you with information about his or her remuneration. The broker will ask you questions to get a better idea of your needs and financial situation. Examples of questions you might 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, call the AMF Information Centre or check the Register of firms and individuals authorized to practise.
End of the insightIf the broker determines that you will likely be able to obtain a mortgage loan, he or she will ask to meet with you. Depending on your needs and the lenders’ requirements, you will be asked to bring certain documents with you. For example:
- proof of your 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 will usually ask for your authorization to consult your credit report.
The broker will then identify one, two or three potential lenders, depending on your situation and goals. He or she will discuss such things as the term you would like to repay your mortgage over, the mortgage’s features, the penalties that would apply if you were to break your mortgage, and 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.
Exclusivity clause
The contract you sign with the broker may contain an exclusivity clause whereby you undertake, usually for the term of the contract, not to obtain a mortgage loan on your own or through someone other than the broker you are dealing with.
Feel free to ask the broker about the clause and any other aspects of the contract. You are responsible for knowing exactly what you are agreeing to. The broker must explain the clause and the penalty to you (how much it is and the conditions under which it will be charged).
If you disregard the exclusivity clause, you could end up paying a very large penalty (e.g., 1% of the amount of the loan you are looking to obtain).
If you qualify, the lender will usually send the final approval to the broker, who will then give it to you. If you purchase a property, the broker will make sure everything’s in place so that you can finalize the transaction at your meeting with the notary.