Not all files have fees. Make sure you know how much and why.
This topic could expand into an all-encompassing look at the actual process and degree of tenacity and skill it takes a broker/agent to obtain approvals on certain mortgage loans but we’ll skim over a little here. We are basing this on Borrower Types, and mortgage types we see in the current mortgage industry in Ontario.
I hope this post helps explain why you may be charged a fee on your mortgage approval at funding.
Triple-A Lending
First, let’s take all Triple-A credit (680 and above) borrowers and understand that clients that have low risk usually are placed with banks and great credit lenders. These clients, more often than not, get the best rate. These banks and lenders pay the brokerage and then to your broker and/or agent. Insured deals (5% to 19.99% down payment) are an example of this.
All deals discussed in the above paragraph result in no fees period from the brokerage.
Alt-A Lending
To access this market you must have 20% down. As a standard, the lender will require a 1% fee, and brokerage charges can range given the complexity of the deal from 1% to 1.5%. These deals come with a good rate but not like Triple-A. Terms range from 1 to 5 years. This all depends on what type of Alt “A” Lending.
B Lending
To access this mortgage lender market for your home purchase you must have 20% to 35% down. Fees from the lender’s side are 1%. Brokerage charges can range from 1% to 2% given the difficulty and scope of the transaction. Check out what a B Lending Mortgage looks like on closing.
M.I.C.s or Mortgage Investment Corporations
Charges are around the same as B Lending. The workload is similar but the mortgage interest rate almost always increases. M.I.C.s generally charge 1% to 1.5% to the borrower on closing. Depending on the brokerage and the amount of exit strategy involved, fees can range from 1% to 3% on closing to the borrower. Check out our illustration on what a M.I.C. looks like on closing.
Private Mortgage Lending
Fees can vary drastically. Mortgage Suite has seen fees as high as 3% brokerage and 3% lender fee. This happens due to the complexity and risk of the file. In addition, private files take an exit strategy to get out of these types of loans. As a borrower always ask if fees are all in or separate. Check out what a Private Mortgage looks like on closing.
Full disclosure from your Agent or Broker at Mortgage Suite can help communicate why there are fees if they arise. You will need to sign a letter of direction for such fees to be legally payable to the brokerage on your mortgage transaction funding date.
