A broker, Maria, is negotiating a second private mortgage for a client, Carlos, in Halifax, who needs funds for an urgent home renovation. The private lender is charging a 3% lender fee, and Maria is charging a 1.5% broker fee. Both fees are added to the loan amount. What must Maria ensure Carlos clearly understands regarding these fees and the overall cost of borrowing?

Question: A broker, Maria, is negotiating a second private mortgage for a client, Carlos, in Halifax, who needs funds for an urgent home renovation. The private lender is charging a 3% lender fee, and Maria is charging a 1.5% broker fee. Both fees are added to the loan amount. What must Maria ensure Carlos clearly understands regarding these fees and the overall cost of borrowing?

Answer options: ✅ Carlos must receive full disclosure of the annual percentage rate (APR), which includes all upfront fees and interest, before committing.

• The fees can be waived if Carlos provides a personal guarantee from a close family member.
• Maria is only obligated to disclose her broker fee, as the lender fee is the lender's responsibility.
• Carlos cannot be charged a broker fee because this is a private mortgage.

Correct answer: Carlos must receive full disclosure of the annual percentage rate (APR), which includes all upfront fees and interest, before committing.

Explanation: The regulations concerning cost of credit disclosure (e.g., Nova Scotia's Mortgage Brokers and Lenders Act) require that the borrower be fully informed of the APR, which effectively annualizes all costs, including interest and all ancillary fees, making the true cost of borrowing transparent.