In most cases, yes. The lender pays the broker a commission, so most clients pay nothing. In rare circumstances, a fee may apply, and a broker must tell you before you proceed.
How Do Mortgage Brokers Get Paid? Commission, Fees and the Best Interests Duty Explained
In most cases, using a mortgage broker costs nothing because the lender pays the broker a commission once the loan settles. That commission is regulated, disclosed to you in writing and should not affect the rate you pay.
So how do mortgage brokers get paid, and how can you be sure the advice is about you and not the commission? Here’s a simple breakdown from our team, with figures from the Mortgage & Finance Association of Australia (MFAA).
Who Pays the Mortgage Broker?
The lender pays the broker. When a broker arranges a loan, the lender pays a commission out of the value it expects to earn from that loan over time.
For you, the result is simple. In most cases, you don’t pay mortgage broker fees: we’re paid a commission by the lender. Our rates are typically the same as going directly to the lender, so you get access to a wider range of options without paying more for the help.
If you’re still weighing up why use a mortgage broker at all, our guide covers the bigger picture.
Upfront and Trail Mortgage Broker Commission Explained
Mortgage broker commission comes in two parts. According to the MFAA’s broker remuneration factsheet, rates are highly standardised across the market.
Upfront Commission
Upfront commission is paid once, after your loan settles. It’s generally between 0.65% and 0.70% of the amount you’ve drawn, excluding GST.
It’s calculated on your loan balance minus any money sitting in your offset account. Brokers can wait up to 90 days after settlement to receive it.
Trail Commission
Trail commission is a smaller ongoing payment, generally around 0.15% of the loan balance each year. It’s also calculated net of your offset balance, and it stops if the loan falls more than 90 days into arrears.
Trail gives brokers a reason to keep looking after you once the loan is in place.
Sample Calculation
Say you borrow $600,000 with nothing in an offset account.
| Commission type | Typical rate | Approximate amount |
|---|---|---|
| Upfront (one-off) | 0.65% | $3,900 |
| Trail (first year) | 0.15% | $900 |
The trail amount falls over time as your balance goes down. Keep in mind this is business revenue, not take-home pay. Brokers use it to cover staff, office costs, software, insurance and regulatory fees.
What Is a Clawback?
A clawback happens when a lender takes back some or all of the broker’s upfront commission. This usually applies if the loan is refinanced or repaid early, typically within the first 18 months to two years after settlement.
It’s important to know who bears that cost. A clawback is the broker’s cost, not yours. The MFAA notes that brokers can’t pass clawback costs on to their clients.
Clawbacks also work in your favour. They give brokers a strong reason to recommend a loan that will suit you for years, not just one that settles quickly.
Why Mortgage Broker Commission Differs Between Lenders
Each lender sets its own commission rates, so the amount can vary slightly from one lender to the next. Some pay a touch more upfront, others a little more in trail.
Because rates sit within a fairly tight band, the difference on a typical loan is usually small. More importantly, the law requires your broker to put your interests ahead of any difference in commission. We’ll explain how that works below.
When Might a Broker Charge a Fee?
Most brokers, including us, are paid by the lender, so mortgage broker fees are the exception, not the rule. Some situations involve more work or if the client goes with a lender that pays little or no commission. Complex commercial lending is one example.
In rare circumstances, a fee may apply, and we’ll always explain it before you proceed with a lender recommendation. You’ll never be surprised by mortgage broker fees after the fact.
Moneysmart suggests asking any broker about fees early, and comparing what different brokers charge.
How Commissions Should Be Disclosed
Australian Credit Law requires brokers to be upfront about how they’re paid. Before helping you, your broker must give you a credit guide. It explains how the broker is paid, which lenders they use most and how to make a complaint.
Before you apply for a loan, you’ll also receive a credit proposal disclosure. It sets out any fees you’ll pay and the expected mortgage broker commission, including how it’s calculated.
If a broker can’t show you these documents, treat that as a red flag. It’s one of the key checks in our guide on how to choose a mortgage broker.
The Best Interests Duty: How the Law Protects You
Since 1 January 2021, mortgage brokers have been bound by the best interests duty. Under national credit law, a broker must act in your best interests when giving credit assistance. If your interests conflict with theirs, they must put yours first.
In practice, that means your broker has to:
- Understand your goals, finances and loan needs before making a recommendation
- Recommend a loan that suits your situation, not the one that pays the most
- Record how the recommendation serves your interests
- Prioritise your interests in any conflict, including over commission
The rules also ban volume-based bonuses and campaign-based commissions that could reward brokers for pushing particular lenders.
The Written Recommendation
Every Aussiewide client receives a written report explaining why we recommended their loan and lender. It explains the reasoning in plain language, so you can review it and compare it with other options.
Why Commission Can’t Steer the Advice
Several safeguards keep commission out of the decision. The rates are standardised, so there’s little to gain by favouring one lender. The best interests duty makes it unlawful to put commission ahead of your needs.
Clawbacks mean a poorly matched loan can cost the broker money. The written recommendation then puts the reasoning in front of you, so you can decide if it holds up.
Questions to Ask About How Your Broker Is Paid
Before you commit, it’s worth asking a few questions about mortgage broker commission and fees:
- How much upfront and trail commission will you receive on this loan?
- Will I pay any fees, and if so, when and why?
- Do different lenders pay you different amounts on my loan?
- What happens to your commission if I refinance in the first two years?
- Can I see the Credit Guide and credit proposal disclosure before I apply?
A good broker will answer each one clearly and without hesitation.
How Aussiewide Works
We compare loans from 80 lenders on our panel, from the major banks to non-bank and specialist lenders. You’ll get a written recommendation, and our repricing team reviews every client’s loan each year to check if it’s still competitive.
You can meet the Aussiewide team online, visit us on Moorabool Street, or speak with our mortgage brokers in Bacchus Marsh and other branches to assess them in person.
Talk to a Broker Today
Curious how the commission would work on your own loan? Book a free chat with a mortgage broker in Geelong, and we’ll walk you through the numbers, commission included.
Frequently Asked Questions
About The Author
Known to most as “Pato”, Andrew Paterson is an award-winning, Licensed Mortgage Broker with over 15 years’ experience in finance and real estate. He works with first home buyers, refinancers and upgraders, making the process clear, calm and practical.
He’s been a finalist for Best Regional Broker, Best Finance Broker and Thought Leader at the Better Business Awards. A lifelong learner and advocate for the industry, he speaks at national events and represents Aussiewide on the world stage internationally.
