Mortgage Retainer

A mortgage retainer is a legal agreement between a mortgage broker and a client which outlines the terms and conditions of the services provided. Like a lawyer, a broker may request a retainer from a client for a mortgage application to cover the work and potential changes that may arise throughout the approval process. The retainer itself is a fee the client pays upfront for the broker’s services. This provides assurance to the broker that the deal will be funded upon all the work being completed.

Mortgage retainers are more commonly associated with Commercial Lending, but in some situations, they may apply to residential mortgages.

Retainer Fee Calculation

The retainer fee for a broker varies depending on their experience, the complexity of the client’s situation, and other factors. However, the calculation will either be a percentage of the total loan or a portion of the final fee upon closing. It’s crucial for clients to understand and review the retainer agreement with a mortgage broker to avoid any confusion. Clients should also clarify any uncertainties before signing.

Currently, retainers are allowed only on residential purchases above $400,000.00. Therefore, discussing the need for a retainer with a broker and fully comprehending the agreement terms are essential for clients. Also, make sure to ask about any additional fees, such as appraisal costs or legal fees.

Benefits of the Mortgage Retainer

One of the benefits of a mortgage retainer is that it provides peace of mind for clients. By paying an upfront fee, clients know that their broker is committed to working on their behalf to secure the best possible mortgage loan. This is especially important for clients who are declined by traditional lenders or have a complicated financial situation.

Another benefit of a mortgage retainer is that it helps clients save money in the long run. Working with a mortgage broker allows clients to secure a lower interest rate on their mortgage loan or negotiate better terms with their lender. This can result in significant savings over the life of the mortgage.

Retainer v.s. Letter of Direction

Along with the retainer agreement, a similar agreement that may be required is the Letter of Direction.

Once you decide that a retainer is needed, you will receive a retainer agreement that must be signed and filed. The retainer must then be paid by way of cheque or e-transfer, and made payable to the Brokerage or Lender.

In conclusion, mortgage retainers are becoming more common in Ontario. There are benefits to working with a mortgage broker and paying a retainer fee. However, it is important for clients to understand the terms and conditions of the agreement and ensure they are working with a licensed professional. Having a reliable mortgage broker and a clear understanding of the retainer agreement can lead to more savings and confidence for clients.