MortgageBrokerTools

Broker Compensation Comparison Calculator

Compare lender-paid and borrower-paid compensation from the borrower’s side: cash at closing against a higher rate.

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Free · No sign-up · Runs in your browser

Broker compensation is paid on every loan. The only question is who writes the cheque and how. Under a borrower-paid arrangement it is cash at closing. Under a lender-paid arrangement the lender pays it and recovers the cost through a higher rate, which the borrower then pays monthly for as long as they keep the loan.

Presented as "no fee", the lender-paid option sounds free. It is not, and the comparison is straightforward once both sides are calculated: cash now against a higher payment for the life of the loan, with a break-even point in months where the two meet. Below that horizon the lender-paid option wins; above it, the cash usually does.

Your numbers

Results update as you type. Nothing is sent anywhere.

Result

Break-even

5.1 years

Break-even
61 months
Cash at closing - borrower paid
$6,000
Extra monthly payment - lender paid
$99
Payment - borrower paid
$2,495
Payment - lender paid
$2,594
Compensation paid by lender
$8,000
Total cost difference over the term
$29,609

Compensation is paid either way. Under a lender-paid arrangement it is funded by a higher rate; under a borrower-paid arrangement it is cash at closing. Neither is free.

The break-even is how many months of the higher payment equal the cash you would otherwise have paid at closing. Borrowers who expect to move or refinance sooner than that are usually better off with the lender-paid option.

Compensation rules are regulated and a broker cannot vary their compensation loan by loan within a plan. Use quoted figures rather than assumptions.

This is an estimate based on the figures you entered. Actual terms, fees and eligibility are set by the lender.

How to use the broker compensation comparison calculator

  1. Enter the loan amount and term.
  2. Enter the borrower-paid rate and the compensation percentage payable at closing.
  3. Enter the lender-paid rate - normally higher - and the compensation the lender pays.
  4. Compare the break-even months against how long the borrower expects to keep the loan.

What people use this for

  • Explaining compensation options to a borrower in dollars rather than in terminology.
  • Advising a borrower who expects to move or refinance within a few years.
  • Comparing the total cost of both structures over the full term.
  • Documenting the comparison that led to a recommendation.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

A typical comparison on a mid-size loan

$400,000 over 30 years: 6.375% with 1.5% paid at closing, against 6.75% lender paid.

Break-even
5.1 years
Cash at closing - borrower paid
$6,000
Extra monthly payment - lender paid
$99

A borrower short of cash at closing

$275,000 over 30 years with a smaller rate gap.

Break-even
8.8 years
Cash at closing - borrower paid
$4,813
Total cost difference over the term
$11,552

Neither option is free

Compensation is a cost of originating the loan and it is present in both structures. The borrower-paid version makes it visible on the closing statement. The lender-paid version buries it in the rate, where it is paid monthly and invisibly.

Borrowers frequently prefer the invisible version, and for short holding periods that preference is also the rational one. It stops being rational somewhere past the break-even.

Holding period decides it

The break-even is the cash at closing divided by the monthly payment difference. A borrower keeping the loan two years and a borrower keeping it twenty are answering different questions with the same inputs.

Since a large share of loans are refinanced or repaid well before term, the short-horizon answer wins more often than the total-cost-over-thirty-years framing suggests.

Compensation rules are not negotiable per loan

Regulation restricts how broker compensation can be set and varied. A broker generally cannot adjust their compensation loan by loan within a plan, and cannot be paid by both parties on the same transaction.

This calculator compares two structures using figures you enter. It is not a statement of what any particular arrangement permits, and the rules should be checked against current requirements rather than assumed.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

  • Each option is amortised at its own rate over the same amount and term.
  • Borrower-paid compensation is treated as cash at closing; lender-paid compensation is reported separately and recovered through the rate.
  • Break-even is the cash at closing divided by the monthly payment difference.
  • The total cost comparison adds the cash at closing to the borrower-paid interest and compares it with the lender-paid interest across the full term.
  • Results are estimates. Real quotes depend on credit, income, property, loan programme and lender pricing at the time of application.
  • Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator is provided for informational and educational purposes only. Results are estimates and may not reflect actual rates, fees, taxes, or market conditions.

This website is not a lender, a mortgage broker or a financial adviser. It does not originate loans, does not accept applications and does not forward your details to anyone.

Actual loan terms depend on credit history, income, the property, the loan programme and lender pricing at the time of application. Only a lender can tell you what you qualify for.

Frequently asked questions

Which option is cheaper?

Over a full thirty-year term, usually the borrower-paid option. Over a short holding period, usually the lender-paid one. The break-even months separate the two cases.

Can compensation be paid by both sides?

No. Compensation comes from one source per transaction. The structure is chosen before the loan is priced.

Can the borrower finance the compensation?

Borrower-paid compensation is generally cash at closing rather than added to the loan balance, though a seller or lender credit may cover part of the closing costs. Confirm against the actual loan estimate.

Is this legal advice on compensation rules?

No. It compares two sets of numbers. Compensation is regulated and the applicable rules should be verified from the current requirements.

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