Mortgage Brokers in Ontario: Licensing and Your Rights

A mortgage broker can help you compare lenders, but the mortgage you sign is a long and expensive commitment. It helps to know who is allowed to do this work in Ontario and what they must tell you.

This article covers licensing, the disclosure a brokerage owes you, and what to do if you think something has gone wrong. It is general information, not advice on your own file.

Who is licensed in Ontario

Mortgage brokerages, brokers, agents and administrators in Ontario are licensed by FSRA under the Mortgage Brokerages, Lenders and Administrators Act, 2006. Consumers may not be protected if they deal with unlicensed people.

You can check a licence on FSRA's public listing, which FSRA says is more reliable than a printed licence. Check the licence of the brokerage and the individual agent or broker before you share financial documents.

A licence check takes only a few minutes, and it is much easier to do before you hand over personal information than after. If you cannot find the person or business on the listing, it is reasonable to pause and ask them to explain.

What a brokerage must do for you

A brokerage must take reasonable steps to make sure any mortgage it presents is suitable for your needs and circumstances. It must also disclose in writing material risks, its relationship with each lender and any actual or potential conflict of interest, and it must get your written acknowledgement.

Timing of disclosure

Required disclosures must be made at the earliest opportunity and no later than two business days before you sign the mortgage agreement or instrument, whichever comes first. Disclosure that is first handed to you at the signing table would not meet that timing, so it is worth raising with the brokerage and confirming your position with a lawyer.

Disclosure only helps if you read it and ask questions. Questions worth raising with a broker before you sign include:

• Why is this mortgage suitable for my needs and circumstances?
• Which lenders do you have a relationship with, and do you have any conflict of interest?
• What would it cost to break the mortgage early? The prepayment penalty is usually the higher of three months' interest on what you still owe or the interest rate differential.
• Can the mortgage be ported to a new home? Whether it can, and on what conditions, depends on the lender.
• Is this a second mortgage? If so, you must keep paying the first mortgage too, and second-mortgage interest rates are usually higher.

Private mortgages and extra caution

FSRA says private mortgages are generally a short-term option, often for one or two years, and are often interest-only. Fees are often higher than for a traditional mortgage, and private lenders may charge fees for late payments, lapsed insurance or property upkeep. Borrowers should have an exit strategy and consider independent legal advice before signing.

Also remember that interest on arrears cannot be charged at a rate higher than the rate on principal not in arrears. A rate above 35% annual percentage rate on credit advanced can be a criminal rate, although certain commercial loans to borrowers who are not individuals are exempt.

When you borrow against your home equity, you can usually borrow up to 80% of your home's value, minus what you still owe. The home is the security, and if you cannot repay you may lose it through foreclosure. Whatever the type of mortgage, it is worth understanding the worst case before you sign.

If something goes wrong

Brokerages must have a process for resolving public complaints, designate people to handle them and keep records. FSRA expects you to complain to the brokerage first and get a written response before it will review the complaint.

Know what FSRA can and cannot do. It cannot relieve a borrower of mortgage obligations, award compensation or decide contract disputes, though it can take regulatory action against a broker or agent who has not complied with the Act. If you have lost money or are bound by a bad mortgage, a lawyer can explain other options.

How this applies depends on your situation, including what you signed and what you were told, so it is worth confirming with a lawyer.

What to do next

• Look up the brokerage and the individual on FSRA's public listing.
• Ask for written disclosure of risks, lender relationships and conflicts well before signing.
• Keep copies of emails, applications and anything you signed.
• Read the terms of any private mortgage and plan your exit.
• If there is a problem, complain in writing to the brokerage first, then consider FSRA and legal advice.

Frequently asked questions