Whether you’re buying a new home, getting pre-approved for a mortgage, or renewing or refinancing your mortgage, a mortgage broker can make your life easier in many ways. But how are they compensated?
You might have heard that working with a mortgage broker costs you nothing as a client. It’s true! Their services are completely free for you! However, in order to earn a living, they must be paid for their work. To ensure you interest remains their priority, their compensation is designed not to interfere with their role as an intermediary.
So, who pays the mortgage broker? How are they compensated? What is their annual income? Let’s explore these questions to better understand mortgage brokers’ salaries.
How are mortgage brokers paid?
Mortgage brokers, whether self-employed or working for a mortgage brokerage, are all compensated in the same way: through commission.
The broker’s earnings are directly linked to their efforts. Their compensation is influenced by factors such as productivity, time invested, and the volume of transactions they complete. The more satisfied their clients are with their services, the more advantageous it is for the broker. Therefore, brokers have a strong incentive to work in their clients' best interests.
Who pays for the mortgage broker?
The commission is paid by the financial institution when a loan is secured through the broker. Clients, however, can access the broker’s services at no cost to themselves.
Although it is the banks that provide this payment, it’s important to note that mortgage brokers work primarily for the clients, not for the lenders. Brokers also have access to a wide range of providers (banks, credit unions, trust companies), which enables them to negotiate better mortgage products and rates tailored to their clients' needs.
Additionnal fees
In addition to the commission received when a new loan is taken out (referred to as intermediary fees), the mortgage broker may also earn two other types of commissions:
-
Follow-up fees: these may be offered by certain lenders when a client remains with them for a set period of time. These fees are usually paid in exchange for a lower initial commission.
-
Renewal fees: these may be paid when a borrower renews their loan with the financial institution.
How much is a mortgage broker's commission?
The mortgage broker's commission can vary from lender to lender. In most cases, however, it falls between 0.5% and 1.2% of your total mortgage amount. This commission is paid directly by the financial institution, meaning you don’t receive any invoices from your side.
Here’s an example of how much a broker might earn for a $400,000 mortgage:
-
0.5% commission: $2,000
-
0.8% commission: $3,200
-
1% commission: $4,000
-
1.2% commission: $4,800
The percentage they receive depends not only on the lender but also on the type of mortgage and the length of the term. For instance, a mortgage with a 5-year term might result in a broker receiving around 0.8% of the loan amount.
It’s also important to note that a mortgage broker may need to share their commission with the brokerage firm they work for. The firm typically takes a portion of the broker's commission, which ranges from 5% to 25%, depending on the broker’s experience and the terms agreed upon with the firm.
Here’s what the broker would receive after splitting the commission with their brokerage, assuming a 0.8% commission on a $400,000 loan:
-
5% split: $3,040
-
10% split: $2,880
-
20% split: $2,560
What is the average annual salary of a mortgage broker in Quebec?
The total salary of a mortgage broker can vary based on several factors, including:
-
The percentage of commission received.
-
The value of the mortgages they manage to finance.
-
The commission split with the brokerage firm they work for.
-
The volume of funding approved through them.
That said, how much can a mortgage broker earn annually? According to the digital platform Nestor, mortgage brokers in Quebec reportedly earn an average of $100,000 per year. However, this figure can vary significantly depending on their specific circumstances.
As with any profession, income tends to increase with experience. It can also vary depending on the time they dedicate to the job (number of hours worked per day, evenings, weekends) and the region they are located in.
For example, a broker working in Vancouver or Montreal is likely to earn more than a colleague working in Abitibi or an Atlantic province, unless the latter puts in extra effort.
For context, in 2017, the average salary for mortgage brokers was estimated to be around $62,000.
Let's take a few examples to better illustrate the many possible salary variations:
1. A broker who earns an average weekly commission of $2,000 would earn approximately $104,000 annually before any tax deductions.
2. A broker who earns an average weekly commission of $2,000 but has to share 5% with their firm would earn $98,800 annually.
3. A broker earning $1,800 in commission per week with a 10% split would have an annual income of $84,240.
4. A broker making $3,800 per week in commission, minus 15% for the brokerage firm's share, could earn nearly $168,000 per year.
Choosing a mortgage broker based on their salary: is it a good idea?
In reality, the mortgage broker’s salary should have little or no impact on your decision to work with them. After all, their services are completely free to you. The bank or financial institution providing the loan is the one that pays the broker’s commission.
While it might be useful to ask about their salary during your initial meeting to ensure transparency, this is not something you should insist on. Instead, focus on the following criteria when choosing your mortgage broker:
-
Their skills: What training do they have? Are they licensed to practise according to AMF requirements? Are they committed to continuing professional development to stay current? How many years have they been practising?
-
Their availability: are they easy to reach? Do they return your calls or messages promptly?
-
Their reliability: are they punctual for appointments? Are they organized?
-
Their listening skills: Do they answer your questions thoroughly? Do they make sure to understand your needs and financial situation?
-
Their honesty: Are they open and transparent with you?
-
Their professionalism: Do they present themselves in a professional manner and treat you with respect?
Ultimately, the most important factor when choosing a mortgage broker is to feel fully confident in their abilities and approach. After all, this will likely be the most significant loan of your life, and trust is essential in such an important decision.
How to become a mortgage broker?
If learning about the compensation of this professional has sparked your interest in changing careers, here’s an overview of the steps you need to take to become a mortgage broker in Quebec:
-
Complete training recognized by the Autorité des marchés financiers (AMF).
-
Register for the mandatory exams.
-
Complete the probation period.
-
Apply for a representative certificate.
-
Practice as a mortgage broker and meet all continuing education requirements.
Are you looking for a mortgage broker?
XpertSource.com can help you in your efforts to find a mortgage broker. By telling us about your project, we will refer you to top-rated experts, free of charge! Simply fill out the form (it only takes 2 minutes) and you will be put in contact with the right experts.
