Ontario Mortgage Broker cheat sheet

In Ontario, mortgage brokering is administered under the Mortgage Brokerages, Lenders and Administrators Act (MBLAA), 2006, with detailed rules in O. Reg. 188/08 (conduct and duties) and O. Reg. 187/08 (licensing).

Licence classes: mortgage broker (may deal in mortgages and supervise), mortgage agent (may deal in mortgages under a broker's supervision), mortgage brokerage (the business entity), mortgage lender, and mortgage administrator.

Every brokerage must designate a principal broker who is responsible for supervision, compliance, and the brokerage's trust accounts; a brokerage cannot operate without one.

Licence renewal is annual; licensees must notify the regulator of changes to prescribed information (e.g., legal name, address, officers) within the time set by regulation, and licences are not transferable.

Mortgage agents and brokers must be sponsored by a licensed brokerage; a licensee may not deal in mortgages on behalf of an unlicensed entity, and compensation may only flow through the sponsoring brokerage.

Education: mortgage agents complete a regulator-approved qualifying course and pass the exam before licensing; brokers require additional education and experience (typically a set number of months/years dealing in mortgages plus a broker-level course).

Disclosure of brokerage relationship: before providing services, the brokerage must disclose in writing the nature of the relationship (brokerage acting for borrower, lender, or both) and the possibility of conflict of interest.

Records must be retained for at least six years after the record is created or the mortgage is discharged, and must be produced to the regulator on request during an examination or inquiry.

Advertising and business names must be accurate and not misleading; licensees may not hold themselves out as acting for a party when they are not, and must identify the licensed brokerage in advertisements.

Open mortgage: repayable in full or in part at any time without a prepayment charge; typically carries a higher rate than a closed mortgage.

Closed mortgage: restricts prepayment; standard prepayment privileges are often 15-20% of the original principal annually plus increased payment options, with a charge (commonly three months' interest or the interest rate differential) on excess.

Fixed-rate mortgage: rate and payment set for the term; variable-rate mortgage: payment or rate fluctuates with the lender's prime rate; adjustable-rate products tie payments directly to the rate change.

High-ratio (insured) mortgage: loan-to-value above 80%; default insurance is required and the premium is typically added to the mortgage balance. Conventional mortgage: LTV of 80% or less.

Hybrid or combination mortgage splits the balance between fixed and variable portions, each with its own term and rate.

Home equity line of credit (HELOC) is a revolving product secured by the home; a readvanceable mortgage combines an amortizing mortgage with a HELOC that re-advances as principal is repaid.

Second mortgages and private mortgages are secured behind a first charge; private lenders typically charge higher rates and fees and shorter terms, and the brokerage must document the suitability discussion.

Reverse mortgage: available to homeowners 55+, no regular payments required, interest accrues, and the balance is repaid when the home is sold or the borrower moves out or dies.

Bridge financing is short-term credit covering the gap between closing a purchase and receiving sale proceeds; it is secured and carries setup and interest costs.

Gross debt service (GDS) ratio = (mortgage principal and interest + property taxes + heating costs + 50% of condo fees) / gross annual income; housing costs should generally not exceed 32% for insured loans.

Total debt service (TDS) ratio = (housing costs + all other debt payments) / gross annual income; the conventional benchmark is 40% for insured mortgages, with lender-specific limits often up to 44%.

Stress testing for insured mortgages uses the greater of the contract rate plus 2 percentage points or the regulator's benchmark rate to qualify the borrower.

Income verification: salaried borrowers provide employment letters and pay stubs; self-employed borrowers typically provide two years of notices of assessment and T1 generals, with stated-income or alternative documentation only where the lender permits.

Down payment source must be verified and, for high-ratio loans, must come from the borrower's own resources or a documented gift; borrowed down payments generally disqualify insured financing.

Loan-to-value is calculated as mortgage amount divided by the lesser of purchase price or appraised value; maximum LTV is 95% for insured purchases of owner-occupied homes.

Property review includes appraisal or automated valuation, title search, zoning and use confirmation, and confirmation of fire insurance with the lender named as loss payee.

Credit assessment considers beacon score, derogatory items (collections, judgments, past bankruptcies), and the number and recency of inquiries; a recent consumer proposal or discharge requires lender-specific waiting periods.

Amortization is the payoff period used to calculate payments; term is the length of the current contract. Longer amortizations and shorter terms lower payments but raise total interest.

Monthly payment on a fixed-rate mortgage: P = A x i / (1 - (1+i)^-n), where A is principal, i is the periodic rate (annual rate / payments per year), and n is total number of payments.

Canadian mortgages compound semi-annually by law, not monthly; convert the nominal annual rate to the effective periodic rate: i = (1 + r/2)^(2/m) - 1, where m is payments per year.

Interest rate differential (IRD) on early payout is approximately (contract rate - current posted rate for the remaining term) x remaining balance x remaining months / 12, as defined in the lender's charge formula.

Three months' interest charge = outstanding balance x annual rate x 3/12.

Loan-to-value = mortgage amount / property value x 100; the insured premium is a percentage of the loan amount based on LTV tier and is usually added to the principal.

Amortization remaining can be solved from the balance and payment: n = -ln(1 - (A x i)/payment) / ln(1+i).

GDS = housing costs / gross income; TDS = total debt service / gross income; both are expressed as percentages and derived from monthly figures.

To compare mortgage options, compute total interest over the term and the effective annual rate; fees, prepayment charges, and compounding frequency all affect the true cost.

Closing cost estimate: land transfer tax (Ontario plus Toronto municipal tax where applicable), legal fees, title insurance, appraisal, adjustments, and HST on fees where applicable.

Fiduciary duty: a licensee acting for a borrower must act in the borrower's best interest, disclose conflicts, and not accept undisclosed compensation from a lender or third party.

Informed consent: the borrower must receive a written disclosure of the mortgage terms, including rate, term, payment, amortization, prepayment charges, and total cost, before committing.

Suitability: the licensee must assess the borrower's needs and circumstances and recommend a product that is suitable, documenting the rationale, especially for private or high-cost mortgages.

Confidentiality: personal and financial information may only be used for the purpose for which it was collected and may not be disclosed without consent or as required by law.

No misleading or deceptive conduct; licensees may not falsify documents, encourage borrowers to misstate income, or arrange financing based on inflated appraisals.

Conflicts of interest must be disclosed in writing, including referral fees, ownership interests in a lender, or a personal interest in the property.

Complaints must be handled through the brokerage's written complaint procedure, with records kept; unresolved matters may be escalated to the regulator.

Mortgage fraud indicators include unsupported income, undisclosed secondary financing, non-arm's-length purchases, and pressure to close quickly; licensees must report suspected fraud to the brokerage.

A mortgage agent may only deal in mortgages under the supervision of a mortgage broker at the same brokerage; an agent cannot act independently or for a different brokerage.

The principal broker is accountable to the regulator for the brokerage's compliance, including supervision of agents and brokers and maintenance of trust accounts.

Licensees must carry on business only under the name shown on the licence and must not use an unlicensed business name in advertising.

Continuing education is required for licence renewal; failure to complete it can result in suspension or non-renewal.

A licensee must report to the regulator within the prescribed time any event that affects the licence, such as a criminal charge, bankruptcy, or a change in the brokerage relationship.

If the borrower expects to repay or refinance within the term, an open or short-term product avoids prepayment charges.

If the borrower has less than 20% down, the loan must be insured and the premium is based on LTV tier; if down payment is 20% or more, conventional financing applies.

If the borrower wants access to equity without refinancing, a HELOC or readvanceable mortgage may be suitable, but the borrower must understand the revolving nature and rate risk.

If the borrower is 55+ and wants no payments, a reverse mortgage is an option, but the borrower must understand that interest compounds and reduces equity.

Insured mortgage benchmarks: GDS 32% and TDS 40%, with lender overlays often allowing up to 44% TDS for strong borrowers.

Stress test rate: greater of the contract rate plus 2 percentage points or the regulator's benchmark rate for insured mortgages.

Maximum insured LTV is 95% for a purchase of an owner-occupied home; refinances are capped at 80% LTV for insured loans.

Amortization limits for insured mortgages are 25 years for most purchases, with limited exceptions for first-time buyers of new homes.

Monthly rate from nominal annual rate: i = (1 + r/2)^(1/6) - 1 for monthly payments, reflecting semi-annual compounding.

Payment factor: payment per $1,000 of principal = 1000 x i / (1 - (1+i)^-n), useful for quick quoting.

Balance after k payments: B = A x (1+i)^k - payment x ((1+i)^k - 1) / i.

Total interest over the term = (payment x number of payments) - principal repaid over the term.

The borrower must receive a written disclosure of the mortgage terms and costs before signing, including any fees payable to the brokerage.

A licensee may not charge a fee for services unless it is disclosed in writing and agreed to by the borrower.

A borrower may cancel a mortgage within the cooling-off period set by the lender or regulation, subject to the terms of the commitment.

A licensee must not take advantage of a borrower's lack of knowledge or vulnerability, and must recommend independent legal advice where appropriate.

Records of dealings, disclosures, and complaints must be kept for at least six years and made available to the regulator on request.

Trust funds must be held in a designated trust account and reconciled regularly; commingling with operating funds is prohibited.

Advertising must include the licensed name of the brokerage and must not contain false or misleading statements about rates or approvals.

A licensee must cooperate with regulator examinations and provide documents and explanations within the time requested.

Fixed-rate mortgages lock the rate for the term; variable-rate mortgages move with the lender's prime rate, and payment changes may lag the rate change.

Term length affects rate: shorter terms typically carry lower rates but expose the borrower to renewal risk.

Prepayment privileges are product-specific and must be disclosed in the commitment; exceeding them triggers a charge.

Portability and assumability features allow a borrower to move or transfer the mortgage without discharging it, subject to lender approval.

Verify identity and down payment source for every file; gifted down payments require a signed gift letter and evidence of transfer.

Obtain a current credit report and reconcile it with the application; unexplained inquiries or new debts must be addressed.

Confirm property insurance, taxes, and condo fees, since they enter the GDS/TDS calculation.

For private or alternative lending, document the exit strategy and the borrower's ability to repay or refinance at term end.

Effective annual rate accounts for compounding and fees; compare it across products rather than the nominal rate alone.

Prepayment charge is the greater of three months' interest or the IRD, as specified in the lender's commitment.

Insured mortgage premium is a percentage of the loan and is typically added to principal, increasing the amortized balance.

Land transfer tax in Ontario is graduated by purchase price, with an additional municipal tax in Toronto.

If a recommendation benefits the licensee more than the borrower, disclose the conflict and recommend independent advice.

If a borrower cannot document income, do not assist in misrepresentation; explore lender programs that permit alternative documentation.

If a product is not suitable, document the reason and decline to proceed rather than complete the transaction.

If a complaint is received, follow the brokerage's written procedure and retain records of the resolution.

A licensee may not deal in mortgages while their licence is suspended or expired, even for an existing client.

A brokerage may not permit an unlicensed person to deal in mortgages on its behalf.

A licensee may not act for both borrower and lender without written disclosure and consent.

A licensee must not accept compensation from a party other than the sponsoring brokerage unless disclosed and permitted.

Construction or progress-draw mortgages advance funds in stages as work is completed, with inspections at each draw.

Bridge loans are short-term, higher-rate, and secured; they must be repaid from sale proceeds at closing.

Private mortgages typically have one- to two-year terms, lender fees, and higher rates, and require suitability documentation.

Reverse mortgages require the borrower to be 55+ and to maintain the property and pay taxes and insurance.

Assess income stability, debt load, credit history, and down payment source together; a strong score does not offset unverified income.

Consider the borrower's total obligations, including co-signed debts and contingent liabilities, in TDS.

Property risk includes location, condition, and marketability; appraisals must reflect current market conditions.

Rate risk: variable-rate borrowers should be assessed for payment shock if rates rise.

Number of payments n = -ln(1 - (A x i)/payment) / ln(1+i).

Outstanding balance after k payments: B = A(1+i)^k - payment x ((1+i)^k - 1)/i.

Payment per $1,000 = 1000 x i / (1 - (1+i)^-n).

Effective periodic rate from nominal annual rate r with semi-annual compounding: i = (1 + r/2)^(2/m) - 1.

Written disclosure must include the rate, term, payment, amortization, prepayment terms, and all fees.

Consent to collect and use personal information must be obtained and documented.

Referral fees must be disclosed in writing to the borrower.

Independent legal advice should be recommended for private mortgages and related-party transactions.

The regulator may examine the books and records of a brokerage at any time and may require production of documents.

Enforcement tools include licence conditions, suspensions, revocations, and administrative monetary penalties.

A licensee must respond to regulator inquiries accurately and within the time specified.

Failure to maintain records or cooperate with an examination is itself a contravention of the licensing rules.

Prepayment privileges, portability, assumability, and skip-a-payment options are product features that must be disclosed.

A collateral charge mortgage secures the debt and may allow future re-advances; it may be harder to transfer to another lender.

A standard charge mortgage is tied to the specific loan and is generally easier to discharge or transfer.

The commitment letter sets out the rate, term, conditions, and fees, and is binding once accepted.

Application, disclosure, and consent are completed first, followed by document collection and verification.

Credit, income, down payment, and property are assessed against lender and insurer guidelines.

Conditions are cleared and the commitment is issued; the file is then sent for legal completion.

Post-closing, the file is retained for at least six years and reviewed for compliance.

GDS = (P&I + taxes + heat + 50% condo fees) / gross income.

TDS = (GDS costs + other debt payments) / gross income.

LTV = mortgage / value x 100.

Three months' interest = balance x rate x 3/12.

Verify identity documents and cross-check names against the credit report and title.

Confirm the down payment source with bank statements and gift letters.

Watch for non-arm's-length purchases and inflated appraisals.

Report suspected fraud to the brokerage and the regulator as required.

The brokerage must maintain written policies for supervision, complaints, and records.

Trust accounts must be reconciled monthly and audited as required.

Agents must be supervised by a broker at the same brokerage.

Business names and advertising must match the licence.

Open vs. closed: open allows penalty-free repayment; closed restricts it.

Fixed vs. variable: fixed locks the rate; variable moves with prime.

Insured vs. conventional: insured applies above 80% LTV and requires a premium.

First vs. second: second mortgages rank behind the first and carry higher rates.

Salaried income is verified by employment letter and pay stubs.

Self-employed income is verified by two years of notices of assessment and T1s.

Rental income is often included at 50-80% of gross rent, depending on lender policy.

Other debts include credit cards (typically 3% of balance), car loans, and lines of credit.

Interest is calculated on the outstanding balance at the periodic rate.

A higher payment shortens amortization and reduces total interest.

A longer amortization lowers payments but raises total interest.

Prepayment charges are the greater of three months' interest or the IRD.

Explain the product in plain language and confirm understanding.

Provide written disclosure before signing.

Document the suitability discussion and the client's instructions.

Recommend independent legal advice for complex or private transactions.