People may be surprised to know to mortgage broker services are usually free. While it is normal that everyone would be paid for its work, it could be useful to explain here how a broker is paid.
Why? Because when you shop for a mortgage, it is always useful to know understand how people who work for you are paid for their services. Salary is a big motivation of human being. If you know where it comes from, you are sure people work for you benefit!
Banks usually pay an allowance to the broker when the mortgage loan is paid. This allowance is a percentage calculated on the amount of the loan.
Since the allowance is bigger if the home mortgage loan is bigger, and since the broker have no control on the amount, he could not influence you to get a bigger allowance.
However, if he is not honest, he could sell you a mortgage from a bank that gives him a bigger allowance percentage, even if it is not the best rate for you…
The following factors may also increase the percentage of the broker’s allowance: the length of the warranty term for rates, the length of the term and variable mortgage rates.
Does the interest rate affect the mortgage broker’s allowance?
Some banks offer to brokers a bonus according to the volume of business the broker provides. And this bonus amount can be significant… The smaller home mortgage brokers could be more influenced than the big ones by this volume premium.
In summary, it is better to work with a mortgage broker who already has a large volume for bonus and for whom premium is not a reason to choose a bank.
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