Buying a new home, renewing a mortgage or refinancing an existing property are all big decisions. When taking these steps, be sure to work with licensed professionals who can help you decide the best options for your needs.
Licensed mortgage professionals help you understand your financing options and guide you through the mortgage application process. Some lenders only work through licensed brokerages, brokers or agents. Licensed mortgage professionals in Ontario are regulated by FSRA and must adhere to the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA). This regulatory oversight means the mortgage professional you choose to work with has met specific education, experience and suitability requirements and continues to adhere to codes of conduct and licensing regulations.
To find the right financing professional, it helps to know the roles and responsibilities of each financing team player as well as the process for finding a licensed professional.
Some persons or entities, such as banks and credit unions, as well as other individuals or groups, such as lawyers (under certain conditions), are exempt from the requirements to be licensed as a mortgage brokerage, broker, agent or administrator. These exempted mortgage providers will not appear on FSRA’s website.
A mortgage brokerage is a business that is licensed by FSRA to carry out mortgage activities. It can employ several mortgage brokers and agents who work with clients directly to find the most appropriate mortgage for their individual needs.
Every mortgage brokerage is accountable for its employees, including brokers and agents. They must ensure their brokers and agents are licensed and follow the MBLAA. You can find a licensed mortgage brokerage near you by searching our database.
Mortgage brokerages are usually paid by the mortgage lender through a commission. However, some brokerages may charge borrowers additional fees. It’s important to go over the details of any payments or fees with a broker/agent during your first meeting. You should also confirm if they are working on your behalf (as the borrower), the lender or both. A licensed broker or agent is required by law to provide written disclosure to you about their relationships with other participants in the mortgage so that you can decide how you wish to proceed.
A mortgage agent is an individual who is licensed by FSRA to carry out mortgage activities for a licensed mortgage brokerage, under the supervision of a mortgage broker. Agents can work with only one licensed mortgage brokerage firm.
A mortgage broker is an individual licensed by FSRA to carry out mortgage activities for a licensed mortgage brokerage. Brokers can work with only one licensed mortgage brokerage firm. A broker may also be responsible for supervising mortgage agents who work at his/her mortgage brokerage.
Mortgage brokers and agents work to negotiate terms and rates with lenders on your behalf. When shopping for the right mortgage, brokers will consider your financial history, down payment and the type of property you are interested in buying or refinancing. The broker will match this information with appropriate mortgage options in the current marketplace. Mortgage brokers and agents act as a liaison between you and the lender and do much of the paperwork required to finalize a mortgage commitment. Find a licensed mortgage broker or agent near you.
A mortgage administrator is a business that is licensed by FSRA to receive mortgage payments from you to send to a lender. Administrators are hired by lenders to monitor the agreement and take steps on their behalf to enforce payments, where necessary. Find a licensed mortgage administrator near you.
A lender is any business organization, person, or group of persons who loan out money for the purchase or refinance of a property like a home. The home is used as security for the loan. Lenders will charge interest on the loan and agree with the borrower on the interest rate, payback time frame (also know as term) and payment frequency.
Banks are the most common mortgage lenders in Canada, but borrowers can also secure a mortgage from other financial institutions (credit unions or caisse populaires, loan and trust corporations, life insurance companies), pension funds, or other organizations, individuals or groups (private lenders).
Private lenders who lend their own money on the security of real estate must be licensed if they are doing business as mortgage lenders. However, private lenders do not need to be licensed if they use a licensed Mortgage Brokerage.
- Mortgage brokers/agents are licensed professionals who look at your finances to determine the right type of mortgage for you.
- Mortgage brokers/agents assess and compare your needs and financial circumstances, identify suitable mortgage options for you, and determine if you meet the lender’s criteria.
- Mortgage brokers/agents gather whatever information and documents are needed and make sure all the paperwork is complete and submitted for the lender to approve.
- They also explain the features and risks of the mortgage and answer any questions.
- Mortgage brokers/agents review the rate, terms and conditions of the mortgage and negotiate with the lender and work with the lender and your lawyer during the closing process.
Mortgage brokers or agents are responsible for helping you understand the relationship you are entering into and the services to be provided to you. They should provide you with information about their role as well as other key aspects of the transaction, such as fees, services provided and all information you will need to provide.
Here is a list of items you can ask each potential mortgage professional to provide:
- Confirmation that they are licensed
- How many lenders the broker/agent works with and who they typically work with
- The nature of the broker/agent-client relationship
- Who the broker/agent represents (you as the borrower, the lender, or both)
- What information you will need to provide
- How that information will be used
- How the broker/agent will be compensated
- The services the broker/agent will provide
- What is expected from you
- Whether or not you need to sign a contract
- Any applicable broker charges and fees
We recommend you get this information to know what to expect before you start working with anyone. This is particularly important if your mortgage broker or agent asks you to sign a written service agreement. Written service agreements are not mandatory in Ontario, but if your broker provides one it will clarify the roles and responsibilities of the mortgage broker/agent and you, the client.
Qualifying for a Mortgage
Mortgage brokers need to obtain certain information from you to assess and advise you on the best mortgage options and to obtain approvals from lenders.
In general, you and/or your spouse or partner will need to provide the following information:
- Confirmation of your income and/or employment earnings
- Your current banking information
- Evidence of your down payment (Note: If your down payment is a gift, you generally need a written letter from the donor stating that the funds do not need to be repaid)
- A list of your assets and liabilities
- The full address of the current property or property being purchased
- A copy of the real estate listing, if applicable
- Contract and building plans, if applicable
- A mortgage preapproval certificate, if one was issued
- Contact information for your lawyer or notary
- A copy of the agreement of purchase and sale, if applicable
- Estimates of your monthly housing costs (e.g., property taxes, utilities, etc.)
Keep in mind that different mortgage providers, brokers and agents may require different documentation requirements.
Mortgage brokerages must securely maintain complete and accurate records related to every mortgage transaction (for at least six years after the expiry of the term/renewed term) in accordance with the Mortgage Brokerage, Lenders and Administrators Act, 2006, and return any original documents you provided upon request.
The information you provide helps mortgage brokers and agents find lenders who offer mortgages that are appropriate and best for your circumstances. These options and their analysis of whether they meet your needs, are based on the information collected from you and their assessment of the lender, the mortgage, its structure, its features and its risks.
Identifying Mortgage Options
When presenting the options, a mortgage broker or agent should explain the benefits of each option to you. You should also receive information about the mortgage commitment to help you decide if you can afford the mortgage while outlining the costs and risks of each mortgage option. This information will help you decide if the mortgage is right for you.
You may be asked to sign a document that says you understand the risks related to the mortgage you have chosen. Be sure to read this document and seek outside legal counsel, if necessary.
Mortgage brokers and agents must provide certain information to help you make an informed decision about your mortgage. This information is known as ‘disclosures’ and includes the mortgage broker or agent’s role in their relationship with you and the lender, as well as the risks of the mortgage, associated costs (if any) and any potential conflicts of interests.
Some examples and characteristics of disclosures are outlined below:
- An estimate of the total cost of borrowing for the term of the mortgage must be provided to you the total cost of the mortgage depends on the terms and conditions for paying it back. These terms and conditions can be the interest rate, fees, and the amount of time it takes to pay off the entire mortgage (i.e., the “amortization period”). It is important to note that with the principal repayment, the total cost of borrowing can be more than the amount you are borrowing.
- In Ontario, mortgage brokerages, brokers and agents are required to disclose to you the material risks of your mortgage. This disclosure must be done in writing and in a manner that is clear, logical and likely to bring the matter to your attention.
- All disclosure provided to you must be timely. Providing you with the right information at the right time will help you make an informed decision. In Ontario, there is a minimum two-day cooling off period, unless waived. Take the time to review the details of the mortgage.
- The information your mortgage broker/agent provides to help you decide must not contain untrue or misleading statements. The information provided should be accurate and clear. If you do not understand any part of your mortgage transaction, you should ask your mortgage broker/agent to clarify it.
Conflict of Interest
Mortgage brokerages, brokers and agents or administrators must ensure that any conflicts of interest, or potential conflict of interest, in connection with the mortgage are provided in writing.
A conflict of interest occurs when the mortgage brokerage, broker, agent or administrator may have a potential or actual personal interest in the transaction. This could mean that the brokerage, broker, agent or administrator may provide you with advice that is in their interests, not yours.
Many things can lead to a conflict of interest, mortgage brokerage, broker, agent or administrator could receive fees or incentives from, be related to or friends with someone involved in the transaction.
Mortgage brokerages, brokers, agents or administrators must inform you in writing about conflicts of interest and should not place their own interests above your interests. If the mortgage broker or agent is only representing you in the transaction, he or she has to place your interests first.
Mortgage brokerages may charge an up-front fee or retainer for loans above $400,000 for services to be provided, or expenses they may have related to the loan This fee should not be paid in cash and must be paid directly to the mortgage brokerage, not the agent or broker.
Submitting the Mortgage Application
Once you select the mortgage agreement that is right for you, the mortgage broker will assess and submit your information to the lender for approval.
The information your mortgage broker provides to the lender must reflect the decision you have made. It must be truthful and consistent with the information you have provided and must not leave out any required information.
Your mortgage broker must submit all the information to the lender in a timely manner. Providing the lender with this information at the proper time ensures they can make the appropriate decision regarding the mortgage.
Real estate agent
A real estate agent is someone licensed to represent a buyer or seller in real estate transactions. Real estate agents will help you locate homes and negotiate the purchase price with sellers. They will not help you get a mortgage. They will likely recommend that you be pre-approved for a mortgage before putting in an offer on a property. Real estate agents are paid a commission by the owner selling the property based on a percentage of the home’s purchase price.
A property inspector inspects homes or buildings. It is best to have an inspection done before you buy a property. They will provide you with information on the condition of the home, including the plumbing, electrical work, insulation, heating and cooling systems, roof and structural stability. A seller can also hire an inspector in order to speed up the process. They prepare a report that provides a list of repairs or code violations along with cost estimates. Buyers often use a home inspection as a way to reduce the price if the property requires a lot of repairs.
Real estate appraiser
A real estate appraiser is a specially educated and licensed professional. They are trained to come up with a fair lending value for a property based on many factors, including age, condition, how much other properties in the area have sold for, and other requirements. The appraiser works for their client, which is usually the lender. The lender tells the appraiser if there are special conditions that their calculations need to include. The price estimate helps lenders decide if the money they are giving a home buyer is a good investment. Appraisers are also sometimes hired by a seller to help them determine a listing price for their home or by a buyer to see if the offer they are prepared to make is reasonable.
A real estate lawyer makes sure all information has been provided and is correct. They will review the contract and mortgage documents, conduct a title search, purchase title insurance on your behalf, register the property in your name, obtain signatures, prepare a Statement of Adjustments that shows the amount you will pay in closing costs, and collect and pay fees. Real estate lawyers will also hold your documents and down payment until the deal closes. Real estate lawyers are paid as part the closing costs of a home sale.
The Canada Mortgage and Housing Corporation (CMHC), Canada Guaranty, and SagenTM provide mortgage insurance. Mortgage insurance is mandatory for down payments less than 20 per cent of the purchase price. This insurance protects lenders against home buyers who are unable to pay their mortgage. The cost is charged to the lender who then usually passes it on to the borrower. The amount is determined by the size of the mortgage and the down payment. It can be paid in a lump sum or added to the overall loan.
An insurance broker is someone licensed by the Registered Insurance Brokers of Ontario (RIBO) to provide insurance for your home and its contents. Some lenders will require you to have home insurance before the closing date. An insurance broker will help you find the best coverage and price for your individual needs. Insurance brokers don’t provide the insurance but will shop around to different insurance companies to get the best deal. Insurance brokers are paid by commission from the issuing insurance companies.
An insurance agent is someone licensed by FSRA who sells home and other property and casualty insurance only through one insurance company.
Life insurance agent
A life insurance agent is someone licensed by FSRA who sells life insurance for one or more insurance companies. Creditor insurance can cover the amount of the mortgage loan. Other life insurance products, such as term life, can help cover the value of the mortgage loan.
Here is a checklist of what your mortgage professional should do:
- Take reasonable steps to ensure that any mortgage they are having you consider is best for you. Are they able to explain the features and risks of the mortgage and how the mortgage offered meets your needs, circumstances and risk tolerance?
- Inform you in writing whether the information that has been provided to you in writing is either an estimate or based on a guess (this includes fees, such as legal costs and appraisal fees, etc).
- Inform you in writing the material risks of each mortgage option.
- Inform you in writing the exact relationship between the mortgage professional and the lender as well as you, the client.
- Inform you in writing any conflicts of interest that the mortgage brokerage, broker or agent may have in connection with the mortgage.
- Provide written information of the cost of borrowing. You are entitled to this information at least two (2) business days before you make a mortgage payment or enter into the mortgage agreement.
- Inform you in writing whether the mortgage brokerage, broker and/or agent will/may receive any fees, payments, or incentives from other individuals or businesses in connection to the mortgage, and if so, from whom and how they are calculated.
- Inform you in writing whether the mortgage brokerage has paid/provided or will/may pay/provide any fees or make payments to other individuals or businesses in connection with the mortgage and if so, to whom and how these fees or payments are calculated.
- Inform you in writing whether any fees or other types of payments will be received by the mortgage brokerage for referring a borrower, lender or investor to another person or business, and a description of the relationship with the other person or business.
- Provide you with all written information in plain language.
Here is a checklist of what your mortgage professional should not do:
- Make you sign the mortgage agreement, without first providing you at least two business days to review it unless you choose to waive this time period in writing.
- Ask you to make an advance payment or deposit for any services to be provided or expenses the mortgage brokerage may have, or by any person or business if your mortgage loan is for $400,000 or less.
- Agree to provide a product or service on the condition that you will also agree to another product or service from the mortgage brokerage.