A mortgage broker can become one of the most important people in your life since his job is to find a perfect offer for you and save thousands of dollars. It is quite a strange question to ask, how much do mortgage brokers make, so today we are going to talk more about ways mortgage brokers gain money, the pros, and cons of having a mortgage broker by your side, and other useful information.
Who Mortgage Brokers Are?
Long story short, a mortgage broker is an intermediary between a bank and a person who wants to take a loan to purchase a home. His job is to find a perfect offer for a client with low interest or suitable for a client in other ways (period, down payment, etc.). Usually, mortgage brokers are really trying to help since their future salary and the whole career depends on clients’ opinions.
Word of mouth is their way of making money. But one may think, how much do mortgage brokers make since their consultations usually are free. We will talk about it a bit later.
It is quite logical to notice that a mortgage broker is paid by the lender, so to say they do not charge the borrower directly. Moreover, it is important for you to know how our mortgage brokers are paid because in this way you will understand his or her behavior and recommendations better.
What Does the Salary of a Mortgage Broker Consist of?
As we already mentioned, a client or a borrower does not pay a mortgage broker directly. So, what are the parts of a mortgage broker`s salary? Here they are:
- Commission from mortgage providers (a percentage of the loan amount by the lender)
- Trailer fee
- Renewal fee
- Other commissions
Okay, now we know the parts of the broker`s salary. But let’s talk about them in greater detail to understand how much do mortgage brokers make. The first position, which is a common commission that is taken from the lender depends on the broker him or herself as well as it depends on the bank.
Usually, it stays in the range of 0.5% to 1.2% of your full mortgage amount. But it is not only the amount that matters, since a broker is a connector between you and a bank, to make his job more fruitful his offers need to be profitable for both a bank and a client. That is why other terms such as type and terms of the mortgage are also taken into consideration.
As for the amount of the broker`s reward. Let’s say that your mortgage broker takes 1% of the commission and your mortgage is 400.000$, so his salary will be approximately 4.000$ (approximately because we do not know all the points in the contract between a broker and a bank).
But what about those fees? What are they? Well, a trailer fee is a fee that is paid by a broker for as long as you stay with a bank. It could be named ‘loyalty fee’. It was created to encourage brokers to recommend staying with one lender instead of switching around them. Plus, for you, as for borrowers it is not good because some banks take prepayment penalties for early changing of a lender.
As for the renewal fee, it is a fee that is paid for a broker when you sign a new contract with your lender. It can also be regarded as a ‘loyalty fee’ because the longer you renew the contract the more your broker will be paid. However, it will be loyalty to your broker and not to the bank since the fact that broker will be paid with a renewal fee even if you change your lender, so feel free to check rates at renewal time, maybe you will find a better option.
Pros and Cons of Having a Mortgage Broker
Now, we know how much do mortgage brokers make, let’s think about whether it is profitable to hire him or not? There is no single opinion on this matter, so we will try to give you just facts.
- He will do all the paperwork for you
- He will negotiate with a bank to get you a better offer
- His opinion can be unprofessional and you can miss a good offer
If you want to sign a mortgage contract directly with a bank — it is your choice, you can do the research yourself, but you can waste a lot of time on it, plus mortgage brokers usually have access to special offers, which regular clients can not see. A bank can offer you a range of mortgage terms and products and all these products are in one place, however, you will be deprived of all other services provided by the broker.
How much do mortgage brokers make: Conclusion
All these topics are important to consider as you try to make a decision whether it is profitable to hire a mortgage broker or not since he or she can make the life of you and your family better. And now you know how mortgage brokers get paid and we hope that this information will help you to filter the information from your broker.