Whether you're in the market for a first mortgage or considering your renewal options, to get the best mortgage, you have to shop around. If approaching the various financial institutions doesn't appeal to you, you may want to let a mortgage broker do it for you.

Don't let anyone pressure you

Take your time. Whether you are dealing with a registered mortgage broker or a financial institution, read everything that requires your signature, including the small print. Before signing anything, review all the loan documents with your lawyer. 

The mortgage broker must be registered

The activities of mortgage brokers in Ontario are regulated by the Mortgage Brokers Act (Ontario), administered by the Financial Services Commission of Ontario. Contact the Commission in Toronto at 416-250-7250 or toll-free at 1-800-668-0128, to confirm that the broker you're using is currently registered (it's required by law), or access their website www.fsco.gov.on.ca, click on Licensing & Registration, then, under "Who is Licensed," click on Mortgage Brokers Registered in Ontario.  

You may also wish to check if the registered mortgage broker is a member in good standing of the Canadian Association of Accredited Mortgage Professionals (CAAMP) at 416-385-2333 in Toronto, or toll-free at 1-888-442-4625. Although it is not obligatory for a registered broker to belong to CAAMP, most brokers are members. CAAMP has a strong code of ethics that members have to adhere to, so you may want to deal with one of their members. You can visit their website at www.caamp.org.  

Mortgage pre-approval is free

Getting pre-approved before you go house-hunting will let you know in advance how much home you can afford to buy. So, one of the first things the broker will do is to pre-approve you for a mortgage, after you have signed an application form for this purpose. Based on your income and other information provided, the mortgage broker will be able to calculate the maximum loan you can carry.

Note: Never purchase a home unconditionally, based on a mortgage pre-approval. Always make sure that your Offer (Agreement of Purchase and Sale) contains the "conditional on the purchaser arranging satisfactory financing" clause.

Before you are granted a mortgage, you will have to produce evidence of income such as T4s, latest tax return, salary letter, in the case of a self-employed or a commission individual, financial statements, 2 or 3 years' tax returns and related Notices of Assessment.

There's no lender in sight

The mortgage broker has access to many lending institutions and investors. A reputable broker will make sure that you get the best loan possible: the lowest interest rate, the best conditions and prepayment privileges, based on your individual circumstances. And you won't have to deal with any financial institution yourself. Many brokers even make house calls, at your convenience.

Generally, regardless of the amount of the loan, if the transaction is straightforward and you meet the normal lending criteria, the broker's service will cost you nothing. The broker gets paid a fee by the financial institution.

Statement of Mortgage 

The Statement of Mortgage is simply a statement of disclosure and must include: what the new mortgage will cost, including all charges and fees by the lender (and the broker, if applicable); the total cost of borrowing, that is, both fees and interest expressed as a percentage; terms and conditions of the mortgage, including payback and prepayment provisions; and any relationship or connection between the broker and the lender. You are also entitled to receive, at the same time (free of charge), an amortization schedule, which describes how payments are applied to the principal and interest of the loan, and a Mortgage Commitment (called a commitment letter) from the lender.  

A copy of the Statement of Mortgage signed by the mortgage broker must be given to you a few days before you are asked to sign the mortgage instrument or a commitment to enter into the mortgage. Read the Mortgage Commitment thoroughly and make sure the terms and conditions are exactly as you intended; if it is not accurate, do not sign it. And do not accept verbal promises. If you have any doubts about the mortgage documentation, have your lawyer review it with you before signing. If asked to initial anything, know what you are initialing, as your initials may indicate acceptance. Always get a copy immediately of everything you sign or initial. You are strongly advised to obtain independent legal advice about the mortgage before you sign the mortgage contract.  

If the principal amount of the mortgage is $200,000 or less, the mortgage broker cannot require you to make, and cannot accept, an advance payment or deposit for services to be rendered or expenses to be incurred by the mortgage broker or any other person. For mortgages of $200,000 or more, if the broker wants a fee upfront, get it in writing that the money will be refunded if a satisfactory loan cannot be arranged. The $200,000 may be increased by the Government at some future date.

Make sure you understand what fees will be charged and why. There are certain fees required to arrange the loan, such as the appraisal fee for a property appraisal requested by the lender and payable to the appraiser.

Everything must be in writing. Make sure all the information is accurate.

It's your choice

If you are a good negotiator and have the time, you may want to approach some lenders yourself; otherwise, you may decide that a registered mortgage broker can do the work for you.