Borrower-Paid Compensation

Borrower-Paid Compensation is a fee structure in which the borrower directly pays the mortgage broker's compensation as a separate closing cost, rather than having it built into the loan's interest rate.

Under this model, the lender does not include broker compensation in the loan pricing, which typically results in a lower interest rate. However, the borrower pays an additional fee at closing to cover the broker's services.

This is the opposite of Lender-Paid Compensation, where the broker's fee is built into the rate. Neither structure is inherently better — the right choice depends on how long you plan to keep the loan and how much cash you have available at closing.

Why This Matters: Understanding how your broker is compensated gives you transparency into the cost of your loan. Federal rules require full disclosure of compensation, and you have the right to ask exactly how your loan officer is being paid.