People are often a bit suspicious when they hear that a broker service is usually free to them. Fair enough. If someone is helping with a major financial decision, you should know how they are paid.
The normal model in Australian mortgage broking is lender-paid commission. The lender pays the broker because the broker has brought them a settled loan. For most standard residential home loans, that means I can help without charging you a direct broker fee.
Why lenders pay brokers
Lenders can get customers in a few ways. They can run branches, employ direct lending staff, spend on marketing, pay for comparison-site leads, or work with brokers.
When a lender works with brokers, they pay commission if a loan actually settles. From the lender's point of view, that is a way to access customers without needing to win every customer directly through their own branch or marketing channel.
Lenders include broker commissions in their distribution costs. I compare the available options and recommend a loan that suits your circumstances.
Types of payment
Upfront commission
This is a one-off payment from the lender after your loan settles. It is usually calculated as a percentage of the loan amount that is actually drawn down, and some lenders calculate it net of offset funds.
Trail commission
This is an ongoing payment from the lender while your loan remains active. It is usually based on the remaining loan balance, often paid monthly, and it generally reduces as the loan balance reduces.
Clawbacks
If a loan is paid out or refinanced too quickly, the lender may take back some or all of the upfront commission. This is called a clawback. It is a cost to the broker when a loan ends early.
Broker fees
For most standard residential loans, I do not charge a broker fee. In specialist, unusual, commercial or very time-heavy scenarios where commission is not paid or does not reflect the work required, a fee may apply. If that happens, I discuss it first.
What does this cost you?
For most clients, there is no direct brokerage fee. You still have normal loan and property costs, such as lender application fees, government registration fees, legal costs, stamp duty where applicable, valuations or other third-party costs. Those costs can apply whether you use a broker or go direct.
I will explain the costs before you proceed. You should not be surprised by a broker fee halfway through the process.
How the arrangement works
- You get help without a direct broker fee for most standard home loan scenarios.
- The lender gets business without needing to win every client through its own direct channels.
- The broker has a reason to do a good job because happy clients, repeat business, referrals, trail commission and long-term relationships matter more than a small commission difference between lenders.
What about conflict of interest?
It is a fair question. If lenders pay brokers, could a broker recommend a loan because it pays more?
There are a few practical protections here.
- Australian mortgage brokers must act in the client's best interests when providing credit assistance.
- Commission levels across mainstream residential lenders are generally similar, so the difference between two suitable lenders is usually not the main business incentive.
- I disclose commissions and lender payments as part of the loan process.
Do brokers get the same rates as going direct?
Using a broker should not mean you pay a higher rate just because a broker is involved. Lenders use brokers because brokers are a major source of home loan business, and they generally want their broker channel to be competitive.
Sometimes the rate is the same as going direct. Sometimes brokers can access negotiated or broker-channel pricing. Sometimes a direct bank offer may be different. I compare the rates, fees and features before recommending an option.
Trail commission and ongoing service
Trail commission is sometimes misunderstood. It is not a fee coming out of your bank account. It is an ongoing lender payment that gives the broker a reason to keep servicing the loan after settlement.
Your loan may need reviewing after settlement. Your rate can become uncompetitive. Your income can change. You might buy again, refinance, renovate, start a family, become self-employed or need to restructure debt.
Trail commission supports the long-term service model: annual reviews, rate checks, answering questions and helping when your situation changes.
When I may charge a fee
Most standard home loans are handled on the lender-paid commission model. There are some scenarios where a separate fee may be needed, such as:
- specialist lending where no commission is payable;
- complex applications that require substantial work;
- commercial, private or non-standard lending;
- situations where the lender payment is not available or does not reflect the work involved.
If a fee applies, I'll explain it and provide a written quote before you commit.
The long-term value of a broker
The first loan is only one part of the relationship. A useful broker helps you understand your position, choose a suitable loan, get the application through, and then keep an eye on whether the loan still makes sense later.
Ongoing service includes reviewing the loan and helping when your circumstances change.
Sources and extra context
The broker market share figures and commission structure notes are based on public guidance from the MFAA, Moneysmart, and ASIC's Best Interests Duty guidance.