Mortgage Broker vs. Bank: Who Actually Pays? (2026)
Most brokers are paid a commission by the lender when your mortgage funds, not by you. FSRA's written-disclosure rule is how you confirm it, and there are real cases where that isn't true.
On a standard residential mortgage, the kind most people reading this are getting, the lender pays the broker a commission when the deal closes. It doesn't show up as a line item in your closing costs and it doesn't come out of your down payment. Your rate can still end up different from what a bank teller quotes you, sometimes lower, because a broker can shop lenders you can't walk up to directly. And on some files, including private lending, larger loans, and a handful of fee-for-service brokerages, the broker does bill you. "Brokers are free" is the wrong thing to assume walking in; "ask, and get it in writing" is the right one.
How the commission actually works
The Financial Consumer Agency of Canada puts it plainly: brokers "generally don't charge fees for their services," and instead "usually receive a commission from the lender when they arrange a transaction." That commission is a finder's fee the lender pays for originating a mortgage it wouldn't otherwise have gotten, similar in principle to what a bank spends on a branch employee's salary and bonus to originate the same loan in-house. It's paid once, when the mortgage funds, out of the lender's own margin.
Industry figures put the typical commission somewhere between 0.5% and 1.2% of the mortgage amount, though the exact split depends on the lender and the mortgage type, and no regulator publishes a single official number. Some brokers take a smaller upfront commission in exchange for a trailer fee paid over the life of the mortgage instead. That structural choice changes their incentives more than it changes your bill.
Why a broker's rate isn't always what a bank offers
A broker can place your file with lenders you can't approach on your own, including monoline lenders that have no branches and no walk-in business at all. Some of that pricing is genuinely better than what a bank posts for someone who shows up unannounced, because the lender isn't carrying a branch network's overhead on that file. None of this is guaranteed on every mortgage: a big bank will sometimes match a competing written offer if you bring one back to your branch, and a broker's headline rate can be inflated slightly if they're taking a bigger commission on that particular lender's product. Once you have a number from either side, run it through our mortgage payment calculator before comparing — a 0.1% difference on a $500,000 mortgage is a real monthly figure, not a rounding error.
When a broker charges you directly
Ontario's rule, under Ontario Regulation 188/08, is specific rather than a blanket ban: on a mortgage of $400,000 or less, a brokerage "shall not require a borrower to make, and shall not accept, an advance payment or deposit" at all. Above $400,000, a brokerage is allowed to charge an upfront fee or retainer for services rendered or expenses incurred, and that payment has to go to the brokerage itself, not the individual agent, and can't be paid in cash. In practice this shows up most on larger and more complex files.
Private and alternative lending is the other place this comes up. When a deal goes to a private lender or mortgage investment corporation rather than a bank, the broker's fee is often taken directly from the mortgage proceeds at closing, on top of a separate lender fee the private lender itself charges. Neither fee is hidden by rule, but both need to be asked about explicitly, because a private-lending file doesn't automatically come with the same "the lender pays" assumption that a standard insured mortgage does. A small number of brokerages also run a flat fee-for-service model on any file, charged instead of taking lender commission. It's uncommon, but it exists, and it has to be disclosed the same as everything else.
| Scenario | Who pays the originator | What to confirm |
|---|---|---|
| Big bank branch | The bank, through the employee's salary and bonus | You're getting that bank's own rates only, not a shopped comparison |
| Broker, standard insured or conventional mortgage | The lender, as a one-time commission on funding | That it's commission-only, with no retainer attached |
| Broker, mortgage over $400,000 | Lender commission, plus a possible retainer for extra service | The retainer amount and what it covers, before you sign anything |
| Private or alternative lender | A separate broker fee from proceeds, plus the lender's own fee | Both fees as dollar amounts, not percentages, before closing |
Sources: Financial Consumer Agency of Canada; Financial Services Regulatory Authority of Ontario, O. Reg. 188/08. Checked 23 September 2026.
How to tell which situation you're in
FSRA's own guidance for borrowers lists a short set of questions to ask a broker before working with them, and near the top is one that matters more than it sounds: "How and when are you paid, and do you get a commission?" Ask it out loud, early, before you've handed over documents. Then don't stop at the verbal answer.
Under sections 21 and 22 of O. Reg. 188/08, a mortgage brokerage has to disclose in writing any fee, remuneration, reward points, incentive, or other benefit payable to it by another party in connection with your transaction, including the identity of who's paying and the basis for the amount. That disclosure has to reach you no later than two business days before you're obligated to proceed, in writing, not as something mentioned in a phone call. If a broker tells you the service is "free" and can't point you to that document, that's the moment to ask again, not the moment to sign.
Two follow-up questions cover most of what's left: is there any retainer or fee I'm expected to pay directly, separate from whatever the lender pays you; and if this is going to a private or alternative lender, what does that lender charge on top of your fee. Neither question is awkward to ask a broker doing this properly. A broker who gets defensive about either one is telling you something too.
Frequently asked questions
Do I pay a mortgage broker directly in Canada?
On a standard residential mortgage, no. The lender pays the broker a commission once your mortgage funds, the same way it would pay a branch employee's salary. Ask for this in writing under FSRA's disclosure rule, since some other arrangements, including private lending and retainers over $400,000, do charge you directly.
Why would a broker's rate be different from what my bank branch offers?
A broker can shop lenders you can't approach directly, including monoline lenders with no branches, and sometimes gets wholesale pricing a branch doesn't offer walk-in customers. That's not guaranteed on every file, and a bank will sometimes match a competing offer if you push back with a written one.
When does a mortgage broker charge the borrower directly?
Ontario bars brokerages from taking any upfront payment on mortgages of $400,000 or less. Above that threshold, a brokerage can charge a retainer for services or expenses, paid to the brokerage itself rather than the individual agent, and never in cash. Private and alternative-lending files often carry a separate broker fee too.
How do I find out exactly how my broker is being paid?
Ask directly, then check the written compensation disclosure FSRA requires brokerages to give you no later than two business days before you're obligated to proceed. It has to name who is paying the brokerage and the basis for the amount, not just state that the service is free.
Is this disclosure rule specific to Ontario?
The $400,000 retainer threshold and the two-business-day disclosure timing come from Ontario's regulation, O. Reg. 188/08. Every province licenses mortgage brokers separately with its own written-disclosure requirement, so confirm the specific form and timing with your own provincial regulator if you're outside Ontario.
Sources
- Financial Consumer Agency of Canada, "Getting pre-approved and qualifying for a mortgage" — how brokers are paid — checked 23 Sept 2026
- Financial Services Regulatory Authority of Ontario, "Mortgage Brokering" consumer guidance and "5 questions to ask" a broker — checked 23 Sept 2026
- Financial Services Regulatory Authority of Ontario, "Mortgage brokerage disclosure requirements," under O. Reg. 188/08, ss. 21–23 — checked 23 Sept 2026
This guide gives general information for Canadian home buyers and sellers, checked against the sources listed above on the date shown. It is not legal, tax, or mortgage advice. Rules and rates change; confirm the current figures with your lawyer or notary, lender, or the government office that administers the tax before you rely on them.