• how much does a mortgage broker get paidHow Much Does a Mortgage Broker Get Paid?

    Many of our inquiries from outsiders and clients want to better understand how much does a mortgage broker get paid. That is a fair question and one that I personally do not mind sharing. In fact, this is the first time I have ever wrote about this. Given our combined experience of 33 years and having lent over 1 billion dollars, we feel the client should understand all aspects of the thought process including how we get compensated. We have decided to demonstrate how mortgages fit in certain categories and how we get paid fills these categories. Factors to consider are the client’s credit, the client’s income, the location of the property and the amount of equity that the clients have.

    In determining how much does a broker gets paid, it is important first to determine what kind of mortgage we are dealing with. Based upon what Sean Howard and I experience, an appropriate breakdown would be the following:

    • 90% Prime Mortgages – Good credit, good income and good equity
    • 10% Sub-Prime Mortgages – Credit, income or property may be funded

    Let’s begin with the easy as to how we earn a commission. We are fortunate that most of our clients fall into the prime section where they get the best rates. Since Mortgage Architects does such large volume, we are able to retrieve the lowest rates with all companies. The next factor is the amount the borrowers require for a mortgage. The final factor is the term that a client chooses. If a client takes a 10-year term, we get paid the highest commission. (We never put clients into a ten-year term). Commissions range from 0.4 of 1% for a one-year term up to 1.40% for a ten-year term.

    Eg. Sara purchased a home for $300,000. She has a 20% down-payment and requires a mortgage of $240,000 over 25 years. She has decided on a 5-year fixed product. What are we paid? It ranges from .75 of 1% to 1.20, so in Sara’s case, we could receive between $1800 to $2880 in commission.

    Sub-Prime Mortgages become a little trickier. Depending on the degree of difficulty and the area in which you may live will determine how much we get paid. Let’s explore this further. Most of the remaining 10% of our files can be broken down accordingly: 85% of the sub-prime files are easy to fix, the remainder, not so easy.

    Sean Howard and I take a very strong approach that if our client(s) do not have an exit plan in place, we will not entertain business. What determines an exit strategy? Your client has poor credit and we need time to fix it, so we can help them get back to the best rates. Income is low this year due to an accident, illness, temporary layoff or even unemployment. As your economic situation improves, so will your mortgage rate and your cash flow.

    With sub-prime rates, not only are mortgage rates higher, but the lenders charge at least 1% of the mortgage amount. In most cases, we do not charge on these files. Why? We are hoping that if we assist you in improving your financial life with our teaching, when you are ready to go with better rates in the future, you the client will come back to our services. As mentioned, our goal for the consumer is to fix the flaw and get back to the best lenders where our clients can save more money. Depending on the individual situation, we will not take a term longer than two years in the sub-prime rates.

    Let’s look at another situation.

    Sara requires a $240,000 sub-prime mortgage for a short period. How much does a mortgage broker get paid? We generally get paid between 0.5of 1% and 0.65 of 1%. So, in Sara’s case, the lender would pay us $1200 to $1565.

    The last area to review is the private mortgage world. They are the most difficult to place and most time consuming. In the vast majority of cases, this is due to the client having no income that they can prove or they may be situated in a remote area where lenders refuse to go. These private mortgages are funded by private companies or private individuals and represent our smallest volume of our mortgages.

    Eg. Sara bought a home in a rural area and she requires a $240,000 mortgage. Since the financial institutions refused her mortgage, we found a private individual who will provide Sara her mortgage funds. Since the individual investor does not pay us, we generally charge a 1% fee or, in this case, $2400. This includes setting up the loan, organizing the appraisal and providing all the necessary paper work.

    We hope this helps you better understand how we get compensated. The examples above do represent the majority of cases, although some mortgages could provide a twist not covered in these instances. Any further questions can be obtained by communicating with our office with that double-no guarantee: No obligation and no pressure.

    Robert Floris is a Mortgage Broker. His office is located at 651 Fennell Avenue East in Hamilton, Ontario. If you would like to speak with Robert, he can be reached at 905-574-9200 #215. Alternatively, you can contact Robert here.

    If you would like to apply for a mortgage online, please follow this link.

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