How is your home loan consultant –courtier hypothecaire- paid?
Many people may not realize it, but two things are important to know about mortgage loans (Intelligence Hypothécaire). 1) Mortgage brokers get their commission based on the size of the loan, not on the interest rate and 2) Brokers often channel all loans to one lender to get a volume benefit.
If you have wondered how a mortgage consultant (Intelligence Hypothecaire) is paid, this will answer your question. Knowing how a person in a transaction is paid is important, since it will lend transparency to the transaction.
Of course, a broker must earn income for his efforts, just as your lawyer, accountant or other expert who performs services for you does. However, in the case of a mortgage consultant, his fees are paid by the lender (Intelligence Hypothecaire) he places the loan with. This fee is based on the size of the mortgage, and so the mortgage consultant has no control over how much his commission will be, in most cases. For instance, a $200,000 loan will earn a fee that is twice as much as a $100,000 loan
There are some cases when the commission can be increased a little. These cases are based on: the term of the home loan - hypotheque, certain variable rate notes, and the length of time a mortgage is guaranteed, in guaranteed mortgage products.
Therefore, the interest rate is not a determining factor for the earnings of the mortgage consultant - courtier hypothecaire . This is different from some of the bonus structures that banks offer their employees. (See “Will my bank offer a better rate than a broker?” to understand this better).
Brokers can, however, improve their fees by working with one lending institution. Banks frequently offer bonus programs whereby a broker will earn additional commission based on the volume of home loans he brings to the bank. It is an important amount, ranging from 20% to 25% over the original commission.
This plan will only attract smaller brokers, since large brokers meet the volume discount levels quickly. A broker like Mortgage Intelligence who typically generate more than $8 billion in loans (for example $8.1 billion in 2005) or Multi-Pret/Mortgage Alliance who generates over $5 billion ($5.3 in 2005) are not influenced by volume programs, and can choose any lending institution they please.
What does this interesting information teach us about negotiating our mortgage through a broker? Number one, that brokers make their fees only through the size of the mortgage, so differences in interest rates are not going to affect them and number two, dealing with a large mortgage consultant will increase the number of lending institutions that your loan will be presented to, since large brokers have no incentive to work with one bank in order to gain a volume bonus.
About the Author
Gregory is an Accredited Mortgage Professional (AMP). To get more information on mortgages - prêt hypothecaires, please visit: http://www.infohypothecaire.com/hypotheque
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