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Who Pays the Mortgage Broker in Canada?

For most standard residential mortgages in Canada, the lender pays the mortgage broker after the mortgage closes. The borrower normally does not receive a separate brokerage bill.

The main exceptions are private mortgages, some alternative or complex files, second mortgages and commercial financing. In those cases, the borrower may have to pay a brokerage fee, lender fee or both.

The exact costs should be disclosed before the borrower signs the mortgage commitment.

Who Normally Pays a Mortgage Broker?

When a borrower qualifies with a bank, credit union, monoline lender or another standard mortgage lender, the lender normally compensates the broker. Payment is generally made after the mortgage funds, so the borrower does not pay an upfront brokerage fee for the standard transaction.

The broker’s compensation varies by lender, mortgage product, term and other factors. There is no single commission percentage that applies to every Canadian mortgage. Instead of relying on a generic percentage, borrowers should ask the broker to explain how they are compensated and whether the recommended lender pays more or less than the alternatives considered.

A bank mortgage specialist is normally paid by that bank and can only offer its products. A mortgage broker can compare products from the lenders available through their brokerage network. That network may be broad, but it does not include every lender or every mortgage product in Canada.

When Does the Borrower Pay the Mortgage Broker?

A borrower may pay a direct brokerage fee when the lender does not provide enough compensation for the work or when the financing falls outside a standard prime mortgage. The fee may be a percentage of the loan, a flat amount or a combination of the two.

Private mortgages

Private lenders commonly charge their own lender fee, and the brokerage may also charge a separate fee. These costs are more common because private mortgages require specialized placement and are often used for short-term, higher-risk or time-sensitive financing.

Broker fees are not the same as lender, legal, appraisal and renewal fees.

B-lender and alternative mortgages

B-lender compensation is not identical across lenders. Some alternative lenders compensate the brokerage, while other files may involve a borrower-paid brokerage or administration fee. Do not assume that every B-lender mortgage is free or that every B-lender requires the borrower to pay the broker.

Second mortgages and bridge financing

Second mortgages and private bridge loans often involve borrower-paid fees because the financing is more specialized and may be short term.

Commercial mortgages

Commercial mortgage brokers frequently charge the borrower because these transactions require property analysis, business financial statements and lender-specific negotiations.

Complex applications

A brokerage may charge when the application requires extensive work because of credit problems, non-traditional income, a recent bankruptcy, tax arrears or an urgent closing. Being self-employed or having imperfect credit does not automatically mean a fee applies; it depends on the lender and the work required.

How Much Are Mortgage Broker Fees?

There is no universal borrower-paid fee for mortgages in Canada. The amount depends on the brokerage, lender, loan size, property, risk and complexity of the transaction.

A brokerage may charge a flat amount, a percentage of the mortgage or a minimum fee. For a percentage-based fee, the basic calculation is:

Brokerage fee = mortgage amount × fee percentage

For example, a 1% fee on a $300,000 mortgage equals $3,000. This is only a calculation example, not a standard Canadian fee. The borrower should request the exact percentage and dollar amount before proceeding.

The mortgage broker fee should be separated from other charges. A transaction can also include a private-lender fee, appraisal cost, legal or notary fees, title-related costs, mortgage-insurance costs or other closing expenses. These amounts do not all go to the broker.

When and How Is the Broker Fee Paid?

A borrower-paid brokerage fee is commonly due when the mortgage closes. Depending on the transaction and lender, it may be paid from the borrower’s funds, deducted from the mortgage proceeds or included in the closing statement prepared by the lawyer or notary.

Do not assume a fee can always be added to the mortgage. Adding costs to the loan depends on the lender, loan-to-value limits and applicable rules.

What if the mortgage does not close?

The answer depends on the agreement the borrower signed. A broker may receive no lender commission when a mortgage does not fund, but an application, commitment, cancellation or administration fee could still be payable if it was clearly agreed to. Review the written terms before paying an upfront or non-refundable amount.

Does Using a Mortgage Broker Increase Your Interest Rate?

Using a broker does not automatically make a mortgage more expensive. For a standard lender-paid transaction, the borrower does not usually pay the commission as a separate charge. However, the broker’s compensation is part of the lender’s cost of acquiring business, and different lenders and products use different pricing models.

The borrower should compare the complete mortgage rather than focusing only on whether the broker is described as free. Important factors include the interest rate, prepayment privileges, penalties, portability, fees, restrictions and total borrowing cost.

Can Broker Compensation Affect the Recommendation?

Mortgage brokers can only recommend products available through their lender network. Lenders may also compensate brokerages differently. This creates a potential incentive that borrowers should understand, but it does not prove that a recommendation is unsuitable.

In Canada, mortgage brokers are licensed and regulated provincially, and compensation and disclosure requirements vary across Canada. In Quebec, mortgage brokerage is overseen by the Autorité des marchés financiers.

Because lenders may offer different compensation and a brokerage only has access to its approved lender network, borrowers should ask why a specific mortgage is being recommended. The best comparison is not simply which lender pays the broker the least or most, but which available product provides the best overall fit and cost for the borrower.

Red Flags to Watch For

The broker will not explain who is paying them.
Fees are not provided in writing.
The broker combines brokerage, lender and legal fees into one unexplained number.
The fee changes shortly before closing without a clear reason.
The broker promises guaranteed approval before underwriting.
The borrower is pressured to accept one lender without an explanation of the alternatives.

Conclusion

For a standard residential mortgage in Canada, the lender usually pays the mortgage broker and the borrower pays no direct brokerage fee. Borrowers are more likely to pay when using private, commercial, second-mortgage or complex alternative financing. Before signing, ask for every brokerage, lender and closing cost in writing and confirm whether any amount remains payable if the mortgage does not close