How Do Mortgage Brokers Get Paid?
In most cases, you pay nothing for a mortgage broker's service. Brokers are paid by the lender — but the law requires us to put your interests first, regardless of how or how much we are paid. Here's exactly how it works.
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What Does a Mortgage Broker Do?
A mortgage broker acts as your advocate in the home loan process. Rather than approaching a single bank directly, a broker has access to a panel of lenders — including major banks, non-banks, and specialist lenders — and does the research on your behalf.
This service is formally called Credit Assistance, and typically includes:
- Understanding your needs, objectives, and current financial circumstances
- Researching a wide range of home loan products from our panel of lenders
- Recommending a loan solution with a competitive rate that is aligned with your best interests
- Assisting with all paperwork from application through to settlement
- Keeping you informed at every step of the process
- Staying in contact post-settlement to ensure your loan remains the right fit for you
This ongoing support — before, during, and after settlement — is part of what distinguishes a good broker from simply walking into a bank branch.
How Brokers Are Paid — No Cost to You
The most common question we receive is: "If I'm not paying you, how do you make money?" The answer is straightforward — the lender pays us after your loan settles.
This commission is built into the lender's cost of doing business. It is not added to your loan, and it does not increase your interest rate. You receive the same (or better) rates whether you go through a broker or apply directly.
Upfront Commission
A one-time payment from the lender when your loan settles, calculated as a percentage of your loan amount.
0.60% – 0.75% incl. GSTTrail Commission
A small ongoing monthly payment based on your outstanding loan balance, paid for as long as your loan remains with that lender.
~0.15% per annumImportant: Commission rates vary between lenders, but under the Best Interests Duty, a broker is legally required to recommend the loan that suits your needs — not the one that pays the highest commission. These two factors must remain independent of each other.
Upfront Commission — The Initial Payment
When your loan settles, the lender pays an upfront commission. This is a percentage of the net loan amount (explained below) and is paid once.
📌 How It's Calculated
- The commission rate is set by the individual lender — it is not negotiated by the broker
- Rates typically fall between 0.60% and 0.75% including GST
- It is paid on the net of offset loan balance — not the full facility limit
- If the full loan amount is not drawn down, the broker does not receive commission on the undrawn portion
Trail Commission — Ongoing Monthly Payments
Trail commission is a small percentage paid monthly by the lender, based on your outstanding loan balance. It typically sits around 0.15% per annum of the balance at the end of each month.
This ongoing payment is an important part of the broker model — it creates an incentive for brokers to stay engaged with clients over the long term, rather than settling a loan and disappearing.
💡 Why Trail Works in Your Favour
- Trail gives brokers a financial reason to review your loan regularly
- If your loan no longer suits your circumstances, a broker should still advise you to refinance — even at the cost of trail income from the current lender
- Under the Best Interests Duty, trail cannot override the obligation to act in your interests
Net of Offset — The Detail That Matters
One of the most commonly misunderstood aspects of broker commissions is how an offset account affects the calculation. Commission is not paid on your total loan limit — it is paid on the net drawn balance, meaning the loan amount minus any funds held in a linked offset account.
Example: $1,000,000 Loan with Offset Account
Zero Offset = Zero Commission (Initially)
If you borrow $1,000,000 and immediately park the full amount in your offset account, the broker receives no upfront commission — because the net drawn balance is $0.
The 12-Month Window
If the loan funds are not used within the first 12 months, the broker will typically receive no commission in relation to those funds at all.
Why This Matters for Offset Strategy
This structure means that recommending an offset account is genuinely in your interest — not the broker's. A broker who recommends a well-structured offset account may actually earn less commission, but that recommendation may save you thousands in interest. The Best Interests Duty requires the right advice, regardless of the commission outcome.
Want to understand how an offset account can reduce your interest and pay off your loan faster? See our guide: Mortgage Reduction Strategy →
Clawback — What Happens If You Refinance Early
Clawback is the mechanism by which lenders recover commissions paid to a broker if a loan is refinanced or paid out within a certain timeframe — usually the first two years.
If this occurs, the lender reclaims the upfront commission from the broker. There is no cost passed on to you. However, it does mean the broker may not be compensated for the time and work they invested in your loan.
| Timeframe After Settlement | Commission Clawed Back | Impact on You |
|---|---|---|
| 0 – 12 months | 100% clawback | No cost to you |
| 12 – 24 months | 50% clawback | No cost to you |
| 24+ months | No clawback | No impact |
🤝 What This Means in Practice
If you are considering selling, refinancing, or making significant changes to your loan within the first two years, please let me know in advance. This allows us to explore whether there is a better way to structure the change — and if a refinance is still the right move, I would ask that you give me the opportunity to assist you with it.
Clawback does not affect the quality of advice you receive. You are always encouraged to make the right financial decision for your situation — even if that means a loan change within the first two years.
Best Interests Duty — The Law Behind the Service
The Best Interests Duty (BID) is a legal obligation that came into effect in Australia in January 2021 as part of the National Consumer Credit Protection Act 2009. It fundamentally changed the obligations of mortgage brokers.
⚖️ What the Best Interests Duty Requires
Mortgage brokers must:
- Act in the client's best interests when providing credit assistance
- Prioritise the client's interests over their own when there is a conflict
- Not allow commission structures to influence their loan recommendation
- Document and justify why a recommended loan is in the client's best interests
In practical terms, this means that even if Lender A pays a higher commission than Lender B, the broker must recommend the loan that is the right fit for your circumstances — regardless of which pays more.
This obligation, combined with trail commission (which rewards long-term client relationships), creates a model where quality advice and client outcomes are directly aligned with how brokers are compensated.
Legislative context: Mortgage brokers in Australia operate under a range of consumer protection laws including the National Consumer Credit Protection Act 2009, the Privacy Act 1988, and the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF). These laws are designed to protect you throughout the lending process.
When a Broker Might Charge a Fee
In the vast majority of cases, there is no fee for using a mortgage broker. The lender pays the commission and the service is provided to you at no direct cost.
However, in some circumstances — typically for highly complex applications, specialist lending situations, or cases where significant additional time is required — a broker may charge a professional fee.
📌 If a Fee Applies, You Will Always Know in Advance
- Any fee must be fully disclosed before you proceed
- It will be discussed openly so you can make an informed decision
- You are never obligated to proceed if a fee applies
- Fees are documented in the Credit Proposal Disclosure
This transparency is a legal requirement — not optional. Brokers are prohibited from charging undisclosed fees under Australian credit law.
Your Right to Full Disclosure
Before proceeding with a home loan through a broker, you will receive a formal document known as a Credit Proposal Disclosure (also referred to in some contexts as a Statement of Credit Assistance). This document sets out:
- Exactly how the broker will be paid (upfront commission, trail, or fee)
- The estimated commission amounts based on the proposed loan
- Any potential conflicts of interest and how they are managed
- The basis for the loan recommendation and why it suits your needs
This disclosure is provided to you before you commit to anything, ensuring you have complete visibility over the broker's remuneration and the factors behind their recommendation.
Related Guides & Resources
Not Sure If Your Current Loan Is Still Right for You?
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Book a Strategy CallGeneral Information Only. The information provided on this page is intended for illustrative and educational purposes. It does not constitute financial or credit advice. Commission rates and structures may vary between lenders and over time. James Sylvester — Credit Representative No. 400033 of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). ABN 78596155035. Normal lending criteria apply.