In the field of real estate, there are many different jobs that people choose to pursue, each with its own requirements for education, skills, and job requirements. Among the most popular jobs, and one that we talk about often on REP, is that of the real estate agent, but there are so many new agents starting their careers every year that it may be making you feel like it’s too crowded of a field for you, and, therefore, you’re looking for something different. The good news is, there are numerous other roles you can fill in the world of real estate.
Another good choice for a real estate career is that of a mortgage broker. Being a mortgage broker is very different from being a real estate agent, but can nonetheless be a very rewarding career in its own right.
In this article, we are going to look at what it means to be a mortgage broker, how you can become one, and how much you can expect to make.
What is a mortgage broker?
A mortgage broker is a real estate professional who specializes in the often complicated world of mortgages. Most commonly, mortgage brokers work with potential home buyers to find the ideal mortgage for their circumstances.
With so many different mortgage products on offer from multiple lenders, and with so many variables, it sometimes can be hard for the average person to understand exactly what the best deal is. This is why a broker's job can be so helpful.
Brokers will collect and compare rates from different mortgage providers and financial institutions, including some exclusive rates that borrowers may not have been able to find themselves. Since they specialize in mortgages, brokers will have the most access to a wide range of products and exclusive rates and be well suited to understanding and comparing different packages. All in all, mortgage brokers are very valuable for home buyers by helping them get the best mortgage rate and saving them money.
How mortgage brokers get paid
Despite offering a lot of value for home buyers, mortgage brokers do not actually get paid by them directly. Rather, mortgage brokers get paid in a similar manner for mortgages as real estate agents do for home sales. That is, they are paid a commission by the lender when the mortgage is approved.
Lenders pay brokers because they do a lot of work in sourcing and setting up the mortgage that otherwise would require their own employee to take care of. This also means that because a mortgage broker is not an employee of the lender, they are able to advocate more for the interest of their clients than that of the financial institution.
How much do mortgage brokers get paid per job?
Mortgage broker commissions are usually paid on each deal they work, calculated as a percentage of the total mortgage amount. Contracts can vary so the exact percentage of a broker's commission can vary as well, but most brokers usually make around 0.5% – 1% of the mortgage value.
So for a mortgage of $400,000, a mortgage broker could make around $4,000 dollars. This amount is paid directly by the lender to the broker, though sometimes the broker's brokerage will take a cut as well.
Recurring payments for brokers
There may also be recurring payments that your broker may make from your mortgage. For example, some lenders will pay the broker an additional amount when the borrower renews their mortgage, meaning they can make money from your mortgage years down the line.
There is also something called trailer fees or renewal fees, which are an amount paid out over time as long as the borrower remains with the lender, though usually, this means a smaller upfront commission, it can also mean steadier income for the broker.
What is the average mortgage broker's salary?
Your yearly salary as a mortgage broker will depend on a few things. For one, your income will be dependent on how many deals you can work on. The more commissions you can collect, the higher your earnings. It will also depend on the area you’re in. Areas with higher home prices or more demand from buyers may mean more and larger commissions.
According to stats from the Government of Canada Job Bank, the median wage for a broker is about $33 an hour or an average salary of around $68,000 a year before taxes, though on the higher end, brokers can earn upwards of $140,000 yearly.
How to become a mortgage broker
If you are interested in becoming a mortgage broker, here are the requirements you will need to complete. Keep in mind that licensing may vary by area, though regulations are similar across many areas. The following is based on the licensing requirements for brokers in Ontario as set out by the Financial Services Regulatory Authority of Ontario.
Getting your mortgage agent license
First of all, all mortgage brokers start out as mortgage agents. To be a mortgage agent you must first complete a mortgage agent training course and some other basic requirements like being over 18 and a resident of Canada. You will also need to pay a licensing fee of around $900. Mortgage agents and brokers have a similar relationship as real estate agents and brokers: agents generally work under a broker and have more limited job responsibilities, but handle some of the same duties.
Becoming a mortgage broker
Once you are a licensed agent there are two major steps you will need to take before you can apply to become a broker. First of all, you will need to complete additional broker education that goes above and beyond your agent education. In addition, you will need to work as a broker for at least 24 months within a three-year period.