A Quick Guide to Ontario Mortgage Lender Fees
Understanding the Landscape Before You Sign
For most Ontarians, purchasing a home is the largest financial commitment they’ll ever make. Between navigating mortgage approvals, appraisals, down payments, and closing costs, it’s easy to lose track of who gets paid—and how. One often misunderstood area is mortgage lender fees: who charges them, when they apply, and what’s considered normal. Understanding the basics of these fees—and when to ask questions—can save you thousands and help you avoid unintentional missteps.
The Role of Mortgage Lenders and Brokers
In Ontario, mortgage financing is generally facilitated by either direct lenders or mortgage brokers. Direct lenders include major banks and credit unions such as BMO, TD, and RBC, which provide mortgages directly to consumers.
Alternatively, mortgage brokers act as intermediaries, shopping your mortgage application around to various lenders to help you secure competitive rates and terms. However, it’s important to note that not all major banks are available through brokers.
While brokers commonly work with lenders such as BMO, TD, and Scotiabank, RBC and CIBC do not currently offer mortgage products through the broker channel.
This means that if you’re interested in working with RBC or CIBC, you would need to approach them directly rather than through a broker.
A Lenders vs. B Lenders vs. Private Lenders
It’s important to distinguish between different types of mortgage lenders:
A Lenders: These are traditional financial institutions that offer the best rates to borrowers with good credit, stable income, and strong financial profiles.
B Lenders: These are alternative lenders that serve borrowers who don’t meet A lender criteria, often due to lower credit scores or unconventional income.
Private Lenders: These are individuals or investment groups lending their own capital, typically at higher interest rates and often with additional fees.
The type of lender you work with dramatically affects the structure and legitimacy of any associated fees.
When Are Mortgage Fees Normal—and When Should You Be Cautious?
1. No Fees for A Lender Mortgages
If your mortgage is being approved by an A lender (such as a big bank), and you’re working through a licensed mortgage broker, you should not be paying a broker fee. Brokers are compensated by the lender directly through what’s called a finder’s fee—usually between 0.5% and 1% of the mortgage amount. This is standard, and it means that for most borrowers, the broker’s service appears “free.”
If you're being asked to pay a fee in addition to this, especially with an A lender, that should immediately raise questions.
2. Fees Are Common with B Lenders and Private Lending
For B lender or private mortgages, fees are more common and can be legitimate. In these cases, mortgage brokers might not receive compensation from the lender directly, and so a broker fee (usually between 1% and 2%) may be charged to the borrower to cover the cost of their work in sourcing the mortgage.
Still, any fee should be clearly disclosed before a mortgage commitment is signed—and not sprung on the borrower as a surprise after everything else is finalized. A lack of transparency is a red flag.
Industry Standard or Outlier? What’s Considered a “Normal” Fee
Generally speaking:
Broker Fees by Lender Type
A Lender (e.g., major banks):
Broker fee typically not charged
Typical Fee: $0B Lender (alternative lenders):
Broker fee may apply depending on the situation
Typical Fee Range: 0.5% to 1.5% of the mortgage amountPrivate Lender:
Broker fee is almost always charged
Typical Fee Range: 1% to 3% (commonly around 2%)
If a fee exceeds 3%, or if you’re being charged 3% for an A lender mortgage, that would be considered unusual and potentially excessive. That doesn’t automatically mean something fraudulent is happening—but it should prompt you to ask for a clear explanation, and possibly seek a second opinion.
Key Questions to Ask Before Agreeing to Any Fee
To protect yourself, consider asking your mortgage broker or lender the following:
Are you compensated by the lender for this mortgage?
Why am I being asked to pay a broker fee?
What percentage is the fee, and what does it cover?
Can I see the total cost of borrowing in writing before signing?
Is this fee negotiable, or are there alternative options?
By law in Ontario, brokers must disclose how they’re compensated. This is typically done through a Cost of Credit Disclosure Statement or Form 10, depending on the specifics of your transaction. If you’re not shown such a document—or if it arrives too late in the process—this could indicate that the broker is not operating with full transparency.
Signing Under Pressure: Know Your Rights
It’s not uncommon for clients to feel rushed into signing documents they don’t fully understand, especially if the broker says, “This is the only way to get the deal done.” While urgency can be real in a hot housing market, it should never override your right to read and understand every agreement. Remember:
You are not obligated to move forward, even if you've submitted documents.
You can request a copy of everything you've signed.
You can walk away before the mortgage is funded, even if you've conditionally agreed.
If a fee is revealed at the last minute, and especially if it wasn’t part of earlier conversations, you may want to pause and get a second opinion. Once a mortgage is funded, reversing it can be very difficult and costly.
The Importance of Working with Reputable Brokers
Ontario has strict licensing requirements for mortgage brokers. All licensed brokers must be registered with the Financial Services Regulatory Authority of Ontario (FSRA), and you can verify a broker's license online. A professional broker will be upfront about fees and never push you into uncomfortable or opaque situations.
If you ever feel misled or deceived by a broker, you can submit a formal complaint through FSRA. While most brokers operate ethically, bad actors do exist—and being informed is your first line of defense.
Final Thoughts
Buying a home is a huge milestone—and often a stressful one. Mortgage brokers can be incredibly helpful in finding you the best deal, especially when your financial situation falls outside traditional banking guidelines. But fees should never be a mystery.
In Ontario, a good rule of thumb is: If you’re borrowing from a major bank, you shouldn’t be paying a fee out of pocket. If you’re working with an alternative lender, make sure every fee is clearly disclosed upfront and make sure you understand what you’re signing.
Taking the time to read the fine print—and to ask the right questions—can protect your finances and your future. Need help? Book a call with us today.
