Are mortgage brokers free?
The short answer and the exceptions.
How Do Mortgage Brokers Get Paid?
You are entitled to know exactly how the person arranging your largest debt is remunerated. Here is the whole structure, including the parts that create a conflict.
Australian mortgage brokers are paid by the lender, not by you. There are two payments: an upfront commission when the loan settles, calculated on the amount drawn, and a smaller ongoing trail commission each year the loan stays open. If the loan is repaid or refinanced early, usually within two years, the lender reclaims part of the upfront through what is called clawback.
Every broker must disclose their remuneration in writing before you apply. Ours is in our Credit Guide. If a broker has not given you one, ask, because it is not optional.
Upfront commission
Paid once, when the loan settles. It is calculated as a percentage of the loan amount drawn down, and on most lenders it is calculated net of any offset balance, which is a detail worth knowing: a broker who suggested you park a large sum in offset at settlement would be reducing their own payment.
Rates are broadly similar across lenders. That similarity matters, because it is what removes most of the incentive to steer you toward one lender over another. Where a lender does pay materially more, that must be disclosed.
Trail commission
A smaller annual payment for as long as the loan remains open and performing. It exists to fund ongoing service rather than a one-off transaction, and it has a genuinely useful consequence: your broker has a financial reason to still take your call in three years and to keep your loan competitive, because if you leave, the trail stops.
It also means a broker is paid less if you refinance away, which is a conflict worth naming. It is the reason to ask a broker directly whether your existing loan is still competitive, and to take a shrug as an answer in itself.
Clawback, the one that catches people
If your loan is repaid or refinanced within a set period, commonly two years, the lender reclaims a portion of the upfront commission from the broker. Within the first year it is often the full amount.
The broker has already done the work and may have already been paid. So some brokers pass clawback on to the client, meaning you can receive an invoice for refinancing or selling early. This is the fee people are least likely to know about until it lands.
Ask any broker, before you engage them: do you pass on clawback? Get the answer in writing. We do not.
Clawback also creates a subtle conflict: a broker facing clawback has a reason to discourage you from refinancing in year one, even where refinancing would benefit you. Knowing the incentive exists is the best protection against it.
What limits the conflicts
Three things, and they are meaningful.
Best Interests Duty. Since 2021, Australian brokers must act in your best interests, enforceable under our Australian Credit Licence. A bank's own staff are not held to this.
Mandatory disclosure. Commission arrangements must be disclosed in the Credit Guide before you apply, not buried afterwards.
Reforms following the Royal Commission. Volume-based bonuses and campaign incentives that rewarded brokers for sending business to a particular lender were curtailed, and upfront commission is now generally calculated net of offset, removing the incentive to inflate the drawn amount.
None of this makes a broker disinterested. It makes the interests visible and constrained, which is the realistic goal.
What this means for you practically
Because commission is similar across lenders, the lender we recommend is driven by which will approve you and price you well, not by which pays us more. Because trail exists, we have a reason to keep your loan competitive over time. And because we do not pass on clawback, refinancing later is your decision, not a decision shaped by our invoice.
If you want to see it in writing before we talk, our Credit Guide is on this site.
Common questions
No. It is paid by the lender from its own margin. Your loan amount and your rate are unaffected, and the rate available through a broker is the same one the lender would offer you directly.
Upfront commission is a percentage of the amount drawn, so a larger loan pays more. This is a genuine structural conflict, and it is why the Best Interests Duty exists and why we assess what you can comfortably repay rather than the maximum you could be approved for.
Rates are broadly similar across lenders. Where a material difference exists, it must be disclosed. Our accreditations and remuneration are listed in our Credit Guide.
Not by us. Some brokers pass clawback on to clients, so ask specifically and get it in writing before engaging anyone.
Some fee-for-service brokers operate that way, charging you a fee and rebating commission. It is a legitimate model. Most brokers, including us, do not, and charge you nothing instead.
Ask us anything about how we are paid
No fee to you, no clawback passed on, and the Credit Guide before you apply.
Related
Our Credit Guide
Remuneration and accreditations, in full.
Broker or bank?
Including when the bank is the better choice.