A career as a mortgage broker
A career as a mortgage broker or agent can be both financially and personally rewarding. As the individual responsible for bringing borrowers and lenders together, you will typically be compensated by the lender in the form of a finder’s fee or commission based on a number of basis points (bps) multiplied by the amount of the mortgage. In other cases, where you are dealing with a borrower who doesn’t qualify with a traditional lender, you may arrange the mortgage with a private lender. In this case you would charge the borrower a brokerage fee that would be deducted directly from the mortgage proceeds.
Income of a mortgage broker
It is important to be mindful of the fact that your role is to always do what is in the best interests of your clients, while being concerned with your own income last. In this way you will always be conducting yourself in a professional and ethical manner.
With this in mind we can take a look at a typical transaction. The typical finder’s fee or commission paid by lenders in today’s marketplace is 85 basis points (.85%), which is referred to as 85 bps. If you have arranged a mortgage in the amount of $300,000, then your brokerage would be paid a finder’s fee of 85bps x $300,000, or .0085 x 300,000 which equals $2,550.
Mortgage broker's commission split
Mortgage agents work on a commission split with their brokerage. For experienced mortgage agents the split can be, on average, 85/15 (the agent receives 85% of the commission). This would equate to a commission payable to you of $2,167.50. For new mortgage agents the split will typically be less until the brokerage has determined that the agent has gained an appropriate level of experience.
The average transaction will take approximately 6 hours to complete (this is an average; some will be longer while others shorter and this amount of time is typically spread over several days). By dividing the commission by the number of hours ($2,167.50 / 6) we can determine that you would have earned $361.25 per hour for this transaction. If an agent were to average 1 transaction per day, his or her income would be approximately $520,200 per year ($2,167.50 x 20 business days per month x 12 months).
Now that we’ve discussed the upper end of an agent’s income potential, let’s discuss the reality for new agents.
Mortgage brokering in Ontario is regulated by the Financial Services Commission of Ontario (FSCO) and requires a license. To obtain a license you must first pass an accredited course. The Real Estate and Mortgage Institute of Canada Inc. (REMIC) is accredited by FSCO to provide the course. For more information please visit us at www.remic.ca/getlicensed or call us at 877-447-3642.
A new agent will typically not have an income for the first three months of his or her career. It takes time to find clients, then it takes time to close or fund the transaction, followed by receiving your commission. A new agent should expect to see an income after the first three months, and should be, given industry averages, aiming for 3 funded transactions per month at the end of his or her first year. An average of 3 fundings per month would equal an income of $78,030 per year.
Of course these are only averages. A highly successful agent may earn substantially more than this amount in his or her first year, while another agent may earn substantially less.
As you continue on your new career path as a mortgage agent it is important to note that many agents earn six figure incomes while others do not; the potential is directly related to the time, effort and expertise, among other factors, of the agent.
As you can see, this can be an extremely rewarding career. Agents have the potential to earn significant incomes while helping borrowers find the product that best suits their needs and circumstances. In performing your duties professionally and ethically you will earn the respect of your industry peers, and develop a fulfilling life long career.