Who Pays the Mortgage Broker?

04 Apr Who Pays the Mortgage Broker?

There are a lot of steps involved with obtaining a mortgage, and it can often seem like every step comes with an extra cost. Therefore, it is reasonable to ask: Who pays the mortgage broker?

Since they don’t ask for any fees upfront when they start working with you, it may seem like the mortgage broker is helping you out for free. However, they are getting a cut out of your total mortgage costs.

With that in mind, it is important to carefully screen your mortgage broker to ensure they are a good fit for you. Remember, they are being paid for their service, so you should expect them to work hard on your behalf.

Do I Pay the Mortgage Broker?

The mortgage broker will almost never require you to pay them upfront. They generally work on commission and are paid once your mortgage closes. While you will have to pay other associated mortgage fees up front, such as your down payment and closing costs, you don’t have to worry about budgeting money out of your picket for the mortgage broker after the fact.

This can lead many people to be afraid their broker won’t work in their best interests to secure a lower mortgage, but this is unlikely. Like most things within the financial industry, mortgage brokers are heavily regulated and legally required to work in your best interest.

In addition, most mortgage brokers rely on word-of-mouth recommendations, so they would rather have a dozen happy customers than burn a few bridges just to earn a little more.

How Will the Mortgage Broker Get Their Money?

Mortgage brokers are paid a “finder’s fee” when your lender approves the mortgage. Therefore, it is in the broker’s best interest to keep you happy throughout the mortgage process because they will not be paid until they secure you a mortgage loan.

Unlike what many people think, mortgage brokers are only concerned with their clients. They do not work with particular lenders or banks but will cast a wide net while looking for a lender to approve you and offer you the best interest rates. 

They also work with many lenders that you would likely not have access to on your own, which is why mortgage lenders can often secure you a better rate.

How Much Does the Mortgage Broker Make Out of Your Loan?

Often mortgage brokers can get discounts on loans since the lender does not have to do any work – all of the information is compiled by the broker. The savings are passed onto the broker, who is paid a percentage of the entire mortgage. This will vary by lender, but typically your mortgage broker will be paid .5% to 1.2% of the total mortgage amount.

You don’t have to worry about receiving a bill because this percentage will be rolled right back into your remortgage. Sometimes the commission will also be split by the brokerage house, but this happens behind the scenes. You will only be responsible for your mortgage at the end of the process and will likely not even notice the small mortgage broker fee.

If you need a mortgage broker or want more information about pre-approved mortgages, contact John Antle for more information.