How mortgage brokers get paid
Upfront, trail and clawback, explained properly.
Are Mortgage Brokers Free in Australia?
It is the first question most people ask, and the answer deserves more than a one-word yes.
For the overwhelming majority of Australian home loans, yes. You pay the broker nothing. The lender pays them a commission when the loan settles, and that commission comes out of the lender's margin rather than being added to your rate. A minority of brokers do charge a fee, and some complex loans attract one, so the real answer is: usually free, always ask, and get it in writing.
We charge you nothing. That is disclosed to you in writing in our Credit Guide before you apply, as the law requires, and it does not change based on which lender you choose.
So who actually pays?
The lender does. When your loan settles, the lender pays the broker an upfront commission, and usually a smaller ongoing trail commission for as long as the loan stays open and in good order.
The reason lenders are willing to do this is straightforward: a broker brings them a customer they did not have to find, with the paperwork already assembled and the application already checked against their policy. That is cheaper for the lender than staffing a branch network to attract the same customer. In effect the commission is a distribution cost that would otherwise be marketing and salaries.
Does it make my rate higher?
No, and this is the part people most reasonably suspect. Commission is paid out of the lender's existing margin. The rate you are offered through a broker is the same rate that lender would offer you directly, and in practice brokers frequently secure pricing below the advertised rate because they can move the application elsewhere.
You can test this yourself. Ask your bank for their best rate, then ask us to approach the same bank. If a broker were adding cost to your loan, going direct would always be cheaper. It generally is not.
When a fee genuinely does apply
Being straight about this matters more than claiming everything is free.
- Commercial and specialist lending. Commercial property, development finance and some SMSF arrangements often carry a broker fee, because the work involved is substantial and lender commissions are lower or absent.
- Very small loans. Below a certain size the commission does not cover the work, and some brokers charge to make the file viable.
- Complex or heavily declined files. Where a case needs extensive restructuring or multiple specialist submissions, some brokers charge for that work.
- Fee-for-service brokers. A small number charge you directly and rebate the commission. It is a legitimate model, simply a different one.
- Clawback. If you repay or refinance the loan within a set period, usually the first two years, the lender reclaims part of its commission from the broker. Some brokers pass that cost to you. Ask about clawback specifically, because it is the fee people are least likely to find out about until it arrives.
What to ask before you engage anyone
Four questions, and any broker worth using will answer all of them without hesitation.
- Do you charge me a fee, in any circumstance?
- Do you pass on clawback if I refinance early?
- How many lenders are on your panel, and are any of them related to you?
- Can I see your Credit Guide before I apply?
That last one is not optional for the broker. Australian credit licensees must give you a Credit Guide disclosing how they are paid and who they are accredited with. If someone is reluctant to hand it over, that tells you what you need to know.
The conflict worth understanding
Free does not mean free of incentives, and pretending otherwise would be dishonest. A broker is paid when a loan settles, which means a broker has a financial interest in a loan settling. Commission also scales with loan size, so there is a structural nudge toward larger loans.
Two things constrain that. Australian brokers operate under a Best Interests Duty, a legal obligation to act in your interests rather than their own, which does not apply to a bank's own staff. And commission rates are broadly similar across lenders, so there is little to gain from steering you to one over another.
The honest position is that no one advising you on money is free of incentives. A bank employee is paid by the bank whose products they are selling and can only offer those products. A broker is paid by whichever lender you choose and can offer sixty. Both have incentives; the second has a wider field and a legal duty attached.
Common questions
No. The rate is the same, because commission comes out of the lender's margin rather than being added to your loan. Brokers often achieve better pricing than a customer walking in alone, because the application can go elsewhere.
A small ongoing payment from the lender to the broker for as long as your loan remains open and performing. It is intended to fund continuing service, and it is one reason to expect your broker to still take your call in three years.
If you repay or refinance within roughly the first two years, the lender reclaims part of the upfront commission from the broker. Some brokers pass that on to the client. Ask before you engage anyone, and get the answer in writing.
Yes. Since 2021 Australian mortgage brokers have been subject to a Best Interests Duty. Notably, that duty does not extend to a bank's own lending staff.
Yes. We are paid a commission by the lender on settlement, we do not charge you a fee, and we do not pass on clawback. All of it is set out in our Credit Guide before you apply.
No fee, sixty-plus lenders, and a Credit Guide up front
Ask us anything about how we are paid. We would rather answer it now than have you wondering.
Related
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Our Credit Guide
The disclosure document, available before you apply.