Essential Questions to Ask Your Mortgage Broker

A mortgage broker certified by the Autorite des marches financiers (AMF) is your best ally in the mortgage-breaking process in Quebec. Unlike a bank advisor who represents the bank's interests, a mortgage broker is required by the Act respecting the distribution of financial products and services (LDPSF) to act in your best interest and present the most advantageous options among all market lenders. However, to get the most from this professional relationship, you need to ask the right questions and understand the answers. Here are the questions organized by theme that will allow you to make the most informed decision possible.

Questions About the Penalty and Current Lender

• What is the exact amount of my breakage penalty, and how was it calculated? Ask the broker to verify the calculation provided by your current lender. Penalty calculation errors are common and can represent thousands of dollars. The broker can identify whether the lender uses the posted or contractual rate in the IRD calculation, a distinction that can double the penalty.
• Is my penalty based on the posted rate or the contractual rate? This question is crucial because major Canadian banks generally use the posted rate (higher) in their IRD calculation, which considerably inflates the penalty. Monoline lenders often use the contractual rate, producing a significantly lower penalty.
• Are there additional fees beyond the penalty? Discharge fees, administrative fees, and sometimes 'insufficient notice' fees can be added to the penalty. Your broker should provide a complete picture of all costs.
• Does my current lender offer blend-and-extend? If so, what blended rate is proposed? Ask your broker to calculate whether blend-and-extend is more advantageous than a full break in your specific situation.

Questions About the New Financing

• What is the best rate available for my profile, and from which lender? The broker should present you with the 2 or 3 best lender options with their respective rates and conditions, not just the lowest rate. A slightly higher rate with better contractual conditions can be more advantageous overall.
• What are the new contract's prepayment privileges? Compare the annual prepayment percentages allowed (10% to 25%), the possibilities for payment increases, and the deadlines for making additional payments.
• How does the new lender calculate its breakage penalty? Ask this question now to protect your future, as you may want to break this mortgage again in a few years. A lender that uses the contractual rate for the IRD calculation protects you against excessive penalties.
• Are there transfer incentives? Ask whether the new lender offers cash back, coverage of legal fees, or other incentives that reduce the net transaction cost.

Questions About Profitability and Timing

• What is my exact break-even with actual numbers? The broker should be able to give you a precise calculation including all costs (penalty, legal fees, appraisal, discharge) and exact monthly savings based on confirmed rates.
• How much will I save over the entire new term after break-even? This figure represents your actual net gain and should be significant enough to justify the time and effort of the refinancing process.
• Should I wait for rates to drop further? The broker can inform you about market trends and Bank of Canada monetary policy. However, no one can predict rates with certainty — if current conditions are favourable, waiting may be risky.
• How long does the complete process take? Ask for a realistic timeline to plan the coordination between approval, appraisal, notary, and funding date.

Questions About Your Qualification

Also make sure to discuss your eligibility for the new financing. Your broker should verify whether you pass OSFI's B-20 stress test at the current rate (the higher of 5.25% or the contractual rate +2%). If your total debt service ratio is close to the 44% limit, discuss strategies to improve your file: partial repayment of certain debts, adding a co-borrower, or selecting a lender with more flexible qualification criteria. The broker can also identify whether your self-employed status, recent promotion, or parental leave requires a particular approach with certain lenders.

Duty of advice (LDPSF)

A legal obligation imposed on mortgage brokers in Quebec by the Act respecting the distribution of financial products and services. This obligation requires the broker to act with honesty, loyalty, competence, and professionalism in the client's best interest, to gather sufficient information about the client's financial situation to make appropriate recommendations, and to disclose any potential conflict of interest. Non-compliance can result in disciplinary sanctions from the Chambre de la securite financière.