Understanding how mortgage brokers get paid is crucial as it directly impacts the cost of your loan. Do property buyers pay them out of their pocket? We delve into these and other pressing questions in this comprehensive guide.
It helps to know how processes surrounding their specifics work when making important life decisions. Indeed, buying a house and taking out a mortgage will be some of the most important decisions in your life.
You might be planning to work with a mortgage broker to acquire that loan. So, if you’re working with a mortgage broker, how do you pay them? Let’s look at all the details.
How Do Mortgage Brokers Get Paid?
Mortgage brokers earn a commission or finder's fee after your loan is approved. You should know several key points about how mortgage brokers get paid.
The lender pays the commission.
Home or property buyers don’t pay the commission per se. The lender does. But it’s not that simple (keep reading to see what we mean). So, borrowers don’t compensate the mortgage broker directly. A mortgage broker’s commission is typically 0.5% to 1.2% of the total loan amount. So, if a mortgage broker helps you secure a $500,000 loan, the lender will pay them $2,500 to $6,000, depending on their arrangement.
They get paid after the loan gets approved.
Mortgage brokers only get paid once the borrower gets approved. Accordingly, there’s no risk on the borrower or lender’s side. All of the uncertainty is on the mortgage broker’s end.
They get a “trail” commission.
Aside from the “upfront” commission— the amount they’re paid within 30 days of the release of principal— brokers often get what’s called a “trail” commission. This is an ongoing commission from the bank or lender as long as the buyer continues with their mortgage consistently.
For mortgage brokers for hire, check out these directories:
| Find Mortgage Brokers In: | |
|---|---|
| Altona Meadows | Altona |
| Williamstown | Newport |
| Altona North | Seabrook |
| Laverton | Spotswood |
| South Kingsville | Seaholme |
| Brooklyn | Williamstown North |
How Long Does the Mortgage Broker Process Take?
On average, it will take around four to six weeks from submitting your application to your lender to getting your settlement. That timeline can vary, however, depending on all kinds of factors like your current credit standing, employment history, and others.
In many cases, a mortgage broker can help speed up this process by assessing your loan and connecting you with the right lender. Bear in mind that mortgage brokers work differently. So, if time is of the essence, check the broker’s past reviews and see if their older clients have noted their speed as a strong suit.
Is a Mortgage Broker’s Commission Rolled Into My Loan?
Here’s the million-dollar question that doesn’t get asked very often. If your lender pays the mortgage broker commission out of your loan, aren’t you necessarily paying them? Yes, that’s definitely the case.
And in many cases, the lender will roll the commission into your loan. So, basically, you are technically paying the mortgage broker and not the lender. But that’s not always the case. The best way to know is to ask. Mortgage brokers are required to act in your “best interest.” That should hold them accountable enough to be transparent with you.
Final Thoughts
When all is said and done, mortgage brokers are service providers, and they should get compensated for their work. Their help provides you with several benefits, and finding a reliable broker or firm will help expedite and simplify the process. In some cases, they can even help you save more money than they get paid by finding better interest rates and loan terms.
If you’re looking for a reliable mortgage broker, check out our directory on Easyhome. We have a whole list of verified brokers who have great standing, raving reviews, and more. Join Easyhome today for free.
