A surprise broker fee at closing can derail your budget. But are mortgage broker fees refundable? Take Sarah Thompson. On March 12, 2024, she closed on her Vancouver condo.
She found a $1,200 “service fee” in her closing statement. She had budgeted carefully, but this unexpected charge forced her to use her emergency fund and delay renovations.
Across Canada, mortgage brokers handle about one-third of all residential mortgages. The share is even higher among first-time buyers. Many borrowers pay nothing upfront with major banks. But more are now facing borrower-paid fees in today’s competitive markets.
This article explains when and why mortgage broker fees may be refunded. It also covers your rights under federal and provincial laws. Plus, it shows you how to get a refund if you’re owed one.
What Are Mortgage Broker Fees?
Ready to close on your mortgage and spot a surprise fee? Learn what mortgage broker fees are, why they’re charged, and how to stay one step ahead.
Broker Fees vs Lender Fees
Broker Fee: Compensation for arranging or negotiating your mortgage. For prime deals, this is usually paid by the lender. For non-prime or private loans, brokers often charge the borrower directly.
Lender Fee: Charges by the lending institution for things like application, underwriting, or administration. These are separate from broker compensation.
Knowing who pays which fee determines whether you see it on your closing statement and whether you can claim a refund.
Common Fee Structures
Origination Commission: Paid by the lender on most prime mortgages, typically 0.5 to 1.2 percent of the loan amount.
Flat Processing or Application Fees: Charged when brokering non-prime or private loans, often a minimum of $2,500 or about 1 percent of the mortgage.
Rate-Hold Deposits: Most major lenders in Canada allow free rate holds (30 to 120 days). Where deposits apply, they’re generally $200 to $500 and refundable if the mortgage doesn’t fund.
Consult or Hourly Fees: For bespoke advisory services, some brokers bill at $150 to $250 per hour. These must be disclosed in writing at the outset.
How Fees Are Disclosed?
FCAC Guidelines: Federally regulated lenders follow the Financial Consumer Agency of Canada’s rules for clear upfront disclosure of all borrower-paid fees.
Provincial Regulations: Bodies like FSRA (Ontario), BCFSA (British Columbia), and their equivalents in other provinces require brokers to provide a written fee schedule and secure borrower acknowledgment before collecting fees.
Are Mortgage Broker Fees Refundable?
In Canada, mortgage broker fees are generally not refundable. Once the broker has completed their work, including finding and securing a mortgage, the fees are typically considered earned.
However, if the broker is paid directly by the lender, you may not pay any fees out of pocket. Always clarify the terms upfront to avoid surprises.
Legal & Regulatory Framework
Not all broker fees are created equal. Some are even protected by law. Here’s how Canada’s rules shape what brokers can charge and what you can challenge.
Federal Oversight & Consumer Protection
FCAC Complaint Process: Federally regulated institutions must respond in writing to consumer complaints within 56 days under FCAC’s consumer protection framework.
Financial Consumer Protection Framework: Sets out rules for transparent cost disclosure by federally regulated lenders, ensuring broker fees appear separately.
Provincial Licensing & Fee-Cap Variations
Ontario (FSRA): Requires broker licences, background checks, and clear fee-disclosure in accordance with the Mortgage Brokerages, Lenders and Administrators Act. Up-front fees or retainers over $400,000 must be paid to the brokerage and documented.
British Columbia (BCFSA): Mandates broker registration and renewal fees and requires written agreements for any borrower-paid fees.
Alberta, Manitoba, Québec, etc.: Each province’s regulator has its own licensing standards, fee-disclosure rules, and consumer-protection mechanisms.
Fit and Proper Requirements
All provinces vet mortgage brokers for criminal history, financial solvency, education credentials, and require errors and omissions insurance before granting licences.
Refundable vs Non-Refundable Fees
Some fees you can fight to get back. Others are gone for good. Know the difference so you’re not caught off guard at closing.
Non-Refundable Items
Third-party credit-check fees (credit bureau charges)
Up-front appraisal fees once the appraisal has been ordered
External service costs such as courier or document retrieval
Potentially Refundable Items
Flat processing or origination fees if the loan never funds
Rate-hold deposits if the rate is not ultimately locked in and the mortgage doesn’t proceed
Pre-paid underwriting or retainer fees when conditions for service aren’t met
Carve-Outs and Administrative Retentions
Broker agreements often allow retention of an “administrative” portion (commonly 10 to 20 percent) of flat fees to cover overhead. These percentages are negotiable at signing.
Typical Refund Triggers
Certain situations make fees refundable. Learn the common triggers that could put money back in your pocket.
Borrower Cancellation Before Rate Lock: Written notice within the hold period triggers full deposit return.
Lender Underwriting Denial: If the lender refuses the application, unearned broker fees must be refunded.
Failure to Meet Loan Conditions by Closing Date: Expired rate holds or unmet conditions can lead to refundable deposits, less any re-lock charges.
Misrepresentation or Omission: Under-quoting fees or omitting costs in the agreement entitles borrowers to contractual remedies.
Breach of Contract by Broker: Missed deadlines or unperformed services allow you to claim refunds per the agreement’s terms.
Timing and Notice Requirements
Miss the deadline, and you might miss your chance. Here’s what you need to know about timing and notice to secure your refund.
Written Fee Schedules
Brokers must deliver a written fee schedule at application and have you acknowledge it before taking any payment.
Provincial “Cooling-Off” Periods
While Canada has no single federal right to rescind like the U.S. TRID, some provinces afford short cancellation windows for broker agreements. Check your provincial regulator’s rules.
Final Accounting
Upon closing or cancellation, brokers must issue a final statement reconciling earned versus unearned fees, clearly showing any refundable amounts.
How to Request a Refund?
Ready to get your money back? Here’s a simple guide to help you request a mortgage broker fee refund.
Review Your Agreement
Identify refundable versus non-refundable clauses and deadlines.
Gather Documentation
Collect your application paperwork, fee schedules, rate-hold notices, and correspondence logs.
Submit a Formal Demand
Write a clear letter or email citing contract sections and the exact refund amount requested. Send by certified mail or with read receipt.
Escalate If Necessary
Contact the broker’s compliance or escalation department. If unresolved, file with your provincial regulator (FSRA, BCFSA, etc.) or submit a complaint to FCAC. For small amounts, consider small-claims court or arbitration.
Common Disputes and Resolutions
Not all refund requests go smoothly. Here’s how to handle common disputes and get the resolution you deserve.
Credit-Pull Fees: Ask for proof of the inquiry. Negotiate a refund of unused check fees.
Rate-Hold Deposits: Rely on the written rate-hold agreement to argue full refund if no rate was locked.
Origination Fee Pro-Rata: Use contract milestones to calculate the unearned portion and request proportional return.
Alternative Dispute Resolution: Mediation through your provincial consumer-protection office or small-claims court when amounts fall within statutory limits.
Best Practices for Borrowers
Stay ahead of surprise fees. Follow these best practices to avoid mortgage broker fee headaches.
Insist on a detailed, written refund policy before signing.
Negotiate administrative-fee carve-outs at the outset.
Log every milestone (dates, emails, calls) in a dedicated file.
Compare multiple broker proposals based on refund terms as well as rates.
Case Studies
Real stories, real solutions. See how others navigated mortgage broker fees and secured their refunds.
First-Time Buyer Cancels During Underwriting
Jane in Calgary withdrew her application after appraisal delays. Her $1,000 processing fee was refunded in full within ten days, thanks to a clear underwriting-denial clause.
Self-Employed Borrower Denied Prime Program
Mark’s stated-income application was declined. Per his contract, the full $1,500 origination fee was returned after lender denial.
Rate-Hold Expiry Due to Appraisal Delays
Priya’s 90-day rate hold lapsed. Her $300 deposit was refunded minus a $50 re-lock charge, demonstrating the negotiated carve-out in her agreement.
Conclusion
Mortgage broker fees don’t have to be a hidden trap. By understanding key terms, knowing your rights under Canada’s laws, and following clear refund steps, borrowers can reclaim unearned fees. This helps avoid unexpected budget shocks.
Secure transparent, written agreements up front, track every milestone diligently, and act swiftly to protect your funds.
Final Tip
Always ask for full transparency from the start. A clear agreement can help you avoid refund issues later on. Get in touch with our experts here or call us on +18443543033 for guidance and support.
Frequently Asked Questions
Can I get my application fee back if I switch brokers?
Yes. If your agreement specifies a refund for borrower-initiated withdrawal before rate lock, you can demand it in writing.
Is a rate-lock deposit refundable if rates rise before closing?
If the lock isn’t executed and the mortgage doesn’t fund, the deposit must be returned per your written agreement.
Do flat-fee brokers ever refund charges?
Many include pro-rata refund clauses. Always confirm these in writing before you commit.
How long does a broker have to issue a refund?
Provincial regulators generally expect refunds within 30 to 60 days of a written demand.
