Mortgage and Broker Contracts: Key Clauses Explained

Mortgage and broker contracts can be long and technical. When you're buying a home, you'll likely sign a mortgage (or loan) agreement with a lender, and possibly a broker or agency agreement if you're working with an estate agent. The notary or lawyer will also prepare final deeds and related documents. If you don't read carefully, you might miss important details—like when your interest rate can change, what happens if you miss a payment, or when you owe the broker commission even if the deal falls through. Here's a plain-language guide to the clauses that matter most, so you know what you're agreeing to before you sign.

Mortgage: interest, repayment, and early exit

The mortgage is usually the biggest financial commitment in the deal. Understanding the key terms can save you money and avoid surprises.

Interest rate

Is the rate fixed or variable? If it's fixed, you know exactly what you'll pay each month for the life of the loan (or the fixed period). If it's variable, the rate can change—often tied to a central bank rate or a benchmark (e.g. LIBOR, or the ECB rate in the eurozone). Check: How often can it change? Monthly, yearly, or at specific intervals? What's the cap, if any? Some variable-rate loans have a cap (e.g. the rate can't go above X%) or a floor (it can't go below Y%). Without a cap, your payment could rise significantly if rates go up. Also check whether there's an introductory or teaser rate—a low rate for the first year or two that then jumps. That can make the initial payment look affordable but leave you with a much higher payment later.

Repayment

How long is the term? 15, 20, 25, or 30 years? The longer the term, the lower the monthly payment—but the more interest you pay over time. What's the monthly payment? Is it principal and interest only, or does it include taxes and insurance (e.g. escrow)? Are there options for overpayment or early repayment? Some lenders allow you to pay extra (e.g. an extra month per year) to reduce the principal and pay off the loan faster. But some contracts have fees or penalties for early repayment—especially in the first few years. In some places you have a legal right to early repayment with limited or no penalty (e.g. in the EU); check your jurisdiction. If the contract says you'll pay a penalty for early repayment, make sure you understand how much and for how long. Know your rights before you sign.

Default

What happens if you miss a payment? Is there a grace period (e.g. 15 days) before late fees apply? What are the late fees? When can the lender call the loan (demand full repayment) or take action (e.g. start foreclosure)? Know the escalation steps: one missed payment might trigger a late fee; several might trigger default and acceleration. You don't want to be surprised. Also check what happens if you're temporarily unable to pay (e.g. job loss, illness): does the lender offer forbearance, a payment holiday, or a modification? Some do; others don't. It's better to know before you need it.

Broker and agency agreements

If you're working with an estate agent or broker, you'll likely sign an agreement that sets out their fees and obligations. Read it carefully—especially when commission is due and whether you owe it even if the deal doesn't complete.

Commission

When is the commission due? On exchange of contracts, on completion, or only if the deal completes? Some agreements say you owe commission when you exchange contracts (i.e. when you're legally bound to buy)—even if the deal later falls through (e.g. you can't get finance, or the seller pulls out). Others say commission is due only on completion (when keys and ownership transfer). The latter is better for you. Is the commission a percentage of the purchase price or a fixed fee? Who pays—you, the seller, or both? In some markets the seller pays the agent; in others the buyer pays or both share. Make sure you know who's paying and how much. If you're the buyer and the agreement says you pay the broker, get the amount or percentage in writing before you start viewing properties.

Exclusivity

Are you tied to this broker for a period (e.g. 3 or 6 months) or for a specific property? If you find a property yourself (e.g. through a listing site, without the broker), do you still pay commission? Some agreements say you do—especially if the broker showed you the property earlier or if the agreement is "ready, willing, and able" (you're obligated to pay if the broker produces a willing seller/buyer, even if the deal doesn't complete). Look for language like "ready, willing, and able" or "commission payable on introduction." That can trigger commission even if you later buy through another channel or the deal falls through. If the agreement is exclusive, understand the period and what happens if you find a property yourself or switch brokers. Can you end the agreement early? What notice is required? Do you owe anything if you switch brokers or cancel?

Termination

Can you end the broker agreement early? What notice is required—30 days, 60 days, or none? Do you owe any fee if you terminate early or switch to another broker? Some agreements say you owe commission for any property the broker introduced you to that you buy within X months—even after you've terminated. That's a "tail" clause. Understand it before you sign. If you're unhappy with the broker, you don't want to be stuck paying them commission on a property you find with someone else months later.

Notarial and completion documents

The notary or lawyer will often prepare the final deed and related documents. These formalise the transfer of ownership and any mortgage. Ask for a draft in advance and a short explanation of each part.

What you're signing

Key points: purchase price, description of the property (address, boundaries, what's included), what's included in the sale (e.g. fittings, appliances, fixtures), and any conditions or warranties. Are there any encumbrances (e.g. easements, covenants) that affect the property? Make sure the description matches what you think you're buying. If something is unclear—e.g. whether the shed or the curtains are included—get it in writing before you sign.

Deadlines

When must the deed be signed? When do keys and ownership transfer? What if one party is delayed (e.g. the seller hasn't moved out, or you haven't secured final mortgage approval)? Clarify who bears risk between contract and completion—for example, who has insurance, who is responsible if the property is damaged before completion, and whether the deposit is released if one party is in breach. In some jurisdictions there's a gap between exchange and completion; know what happens during that period. If you're buying with a mortgage, the lender will usually require the deed to be in their favour (as security) and may have their own requirements. Make sure the notary or lawyer coordinates with the lender so everything is ready on completion day.

BeforeYouSign can highlight interest, repayment, commission, and deadline clauses in your mortgage or broker documents so you know what you're agreeing to before you sign.