Is a Mortgage Broker Worth It? An Honest Look at How Brokers Get Paid

"Is it worth using a broker?" and "How much does a broker cost?" are two of the questions people most often ask Google about mortgage brokers. I think they deserve a straight answer from someone in the business, including the parts that don't flatter us.

How brokers get paid

On most standard residential mortgages, the lender pays the broker a commission. When your mortgage funds, the lender pays the brokerage a fee for bringing them the business. Your rate isn't marked up to cover it. It's part of how lenders who work with brokers acquire clients, instead of paying for bank branches and staff.

That's why, for a typical purchase, renewal, or refinance with a good credit profile, there's usually no direct cost to you for using a broker.

When there can be a cost

This is the part some people skip, so I want to be clear about it.

If your situation falls outside what mainstream lenders will approve, you might work with an alternative or private lender. That could be because of recent credit trouble, income that's hard to document, or a short-term bridge situation. Those lenders often charge a lender fee, and there may be a broker fee as well.

When that's the case, you should know before anything is signed: what the fee is, who it's paid to, and why. Mortgage brokers in Alberta are licensed through the Real Estate Council of Alberta (RECA), and clear disclosure is part of doing this job properly. If a fee ever comes as a surprise, that's a red flag.

So what does a broker actually do?

The value isn't only in the rate, though access to many lenders helps. It's in three things:

1. Matching you to the right lender. Lenders have very different rules. They differ on self-employed income, rental properties, condo types, prepayment options, and penalty calculations. Choosing the right lender for your situation often matters more than a small rate difference.

2. Knowing the fine print. Two mortgages at the same rate can cost very different amounts if you have to break them early. Big bank penalties are often calculated differently from those of monoline (mortgage-only) lenders, and that difference can be thousands of dollars.

3. Staying with you over time. A good broker is there at renewal, when life changes, and when you're weighing a refinance or a move. The relationship matters more than any single transaction.

When your bank might be the better fit

That's the honest version: sometimes it is. If you have a strong relationship with your bank, they're offering a competitive rate, and the product terms suit your plans, staying put can make sense. Some people value having everything under one roof.

A good broker will tell you that. If your bank's offer is solid, I'd rather tell you so than move you for the sake of it.

Questions worth asking any broker

• How are you paid on my mortgage?
• Are there any fees to me, and if so, what are they?
• How many lenders do you work with?
• Why this lender for me, beyond the rate?
• How would the penalty be calculated if I needed to break this mortgage early?

A good broker will be glad you asked.

Your next step

If you're not sure whether a broker or your bank is the better route, send me your bank's offer. I'll give you an honest comparison, including whether you'd be better off staying where you are.