Cost of Using a Mortgage Broker
The services of a mortgage broker are free in most cases. Mortgage brokers get paid by the lender after your mortgage has funded. This is the case with all the major Canadian banks, credit unions, and monoline lenders. These are also known as ‘A’ lenders.
In the case of the subprime or ‘B’ lenders and private lenders; some don’t pay the broker, and in this case a brokerage fee is charged. This fee is disclosed up front so there are no surprises. Subprime and private lenders are only considered as an option when you don't qualify for 'A' lending.
What Costs to Expect
When you purchase a home you need to be able to show that you have 1.5% of the purchase price available to you for closing costs.
We do provide everyone with an estimated closing cost document. This document outlines all the costs to expect so that when your lawyer calls a couple days before closing and asks you to bring a certified cheque in, you’re not caught by surprise at the amount requested.
Often times an appraisal is required whether you’re purchasing or refinancing. This can cost between $300 and $450 depending on the property.
If the transaction is a one-sided purchase or a refinance your lawyer will charge you somewhere between $1000 and $1500. If you are selling your current home and purchasing a home the legal fees will be upwards of $3300.
Land Transfer Tax
This is a closing cost when purchasing. The amount depends on the purchase price. Here is a Land Transfer Tax calculator.
Other Potential Costs
Sometimes there can be other costs such as 8% PST on your mortgage default insurance premium amount if the mortgage is insured, or in the case of new build homes, one of your close costs may be builder adjustments and a new home warranty.
As stated above, we provide you with an estimated closing cost document so you know what to expect.
Mortgage Penalties and Discharge Fees
When you are selling your current home and buying another, your current mortgage can sometimes be ported to the next property. This will depend on whether your current mortgage product has this option.
If you need a larger mortgage a “port and increase” can be done. Your new rate will be a blended rate based on your current rate and the rates available at the time of your new purchase.
Sometimes porting is not an option and you need to break out of your current mortgage. When you break a closed mortgage early you need to pay a penalty.
To find out exactly what your penalty is you will need to contact your current lender and ask.
Different lenders calculate penalties in different ways. It also depends on the mortgage product itself. Knowing how the penalty is calculated is important when choosing a mortgage product in the first place.
Along with a penalty, lenders charge a discharge fee when you break a mortgage. This is usually $300.