How Do Mortgage Brokers Get Paid?    by Andrew Black

in Finance    (submitted 2010-06-02)

Mortgage brokers are a strange bunch. While there is no truth to the rumors that they hold meetings "by the light of the blood moon," or even that they have a secret hand shake, there are many things about mortgage finders about which most people have absolutely no idea at all. And one of those enduring mysteries is how exactly the mortgage brokers of the world get paid.

While the world may never know if brokers had any involvement in Watergate, the payment issue need be a mystery for no longer.

It would definitely be easy to answer 'how do these brokers get paid' by saying, 'either with a check or direct deposit, according to their personal preference.' Of course, the type of person who answers a question in such a literal way is just annoying. When someone asks about mortgage broker compensation, they want to know exactly what a broker is paid to do.

As we all know, a salaried employee is paid primarily to play CYA (which is a crude acronym involving covering a particular body part), and an hourly employee is paid primarily to take up space between bursts of manual labor. However, it is an entirely different world for a broker and their ilk.

As self employed people, brokers have to eke out a living with little to no support from a business. Often enough, the broker actually owns a corporation for him or herself, through which they pay their expenses (and guard their personal assets if legal hassles come up). And of course, this means that there can be no room to simply 'coast' - since a broker has no backup, this means that the broker actually has to add value to the life of another person.

We all know that mortgage specialists handle mortgages. When you wish to perform a mortgage comparison and desire an expert's opinion, a broker will happily help you to compare all manner of mortgages. For independent mortgage advice, brokers are head and shoulders above bankers, who are typically little more than salaried employees who also earn commissions for peddling bank products.

While most mortgage specialists do earn commissions, their opinions on mortgages can be trusted to a greater degree than the opinions proffered by bank employees. Simply put, a mortgage comparison rendered by a broker will not be hindered by company loyalty. Of course, there is the exceptional circumstance of a tied broker, who may have a lucrative contract with a specific company.

And some brokers have even started working on a per hour basis, akin to accountants, attorneys or fee only financial planners. When you compare mortgages with a 'by the hour' broker, you can trust that what they are providing is independent mortgage advice. After all, they are only paid to consult with you.

Of course, there is nothing intrinsically wrong with getting mortgages from a bank, or from a broker who has a contract with only one or two companies. Simply keep in mind when attempting to compare mortgages, that the more independent a source of information on these mortgages may be, the less tainted that source's information will be.

About the Author

Andrew Black writes finance articles for the web