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How do mortgage brokers get paid?

Know what your mortgage broker will earn from your home loan so you receive the right product recommendations.

How do mortgage brokers get paid

Mortgage brokers generally provide their services free of charge to interested borrowers, and are instead compensated by lenders. We delve into some of the different commission structures that mortgage brokers receive to help you ensure that you’re receiving value for money and not engaging with a broker who may have a conflict of interest.

What is a mortgage broker?

A mortgage broker acts as an intermediary between borrowers and lenders. They help clients find a loan that suits their situation by researching, comparing and negotiating for deals on behalf of the client.

What activities does a mortgage broker do?

  • Assess your borrowing requirements. Brokers should also evaluate your serviceability potential across different scenarios.
  • Identify home loan products that satisfy your requirements.
  • Negotiate on your behalf to find the best deal.
  • Provide support for any questions that you have may throughout the process.
  • Organise the paperwork to secure the home loan.

How are mortgage brokers paid?

Mortgage brokers receive a commission from lenders. This compensation will vary depending on the lender as well as the size of the transaction.

Upfront commission

Upfront commission is the commission a broker receives for introducing the home loan customer to the lender. It is normally around 0.3-0.5% of the loan value. For example, for a $850,000 mortgage, a 0.3% commission would amount to approximately $2,550 in the broker’s pocket.

Trail commission

Trail commission is a recurring commission that is calculated based on the remaining loan amount each year, which is paid to them on a monthly basis. Some lenders offer an ongoing commission of 0.1-0.2% based on the remaining value of the home loan. This commission is paid for the broker providing ongoing service to the client.

Want to talk to a mortgage broker? Compare the brokers below

Rates last updated June 24th, 2018
Details Features
Aussie Home Loans
Aussie Home Loans
Aussie is one of Australia's leading financial service providers, having won The Adviser’s Top Mortgage Broker award for the last 3 years. They charge no appointment fees and can meet at a time and place which suits you.
Up to 22 lenders Enquire Now More info
Finsure
Finsure
Finsure has loan offers from over 35 lenders, including major brands, and will work to find a home loan that suits your property needs.
Over 35 lenders Enquire Now More info
eChoice Mortgage Brokers
eChoice Mortgage Brokers
When you do business with eChoice you will be given your own home loan manager to help you select a loan. 25 lenders Enquire Now More info

How much do brokers get paid?

Commission levels vary from lender to lender. Mortgage broker Zak Avery of Blue Fox Finance in Queensland shared with us the rates of some of the nation's top lenders.

LenderUpfront commissionYear 1 trail per monthYear 5 trail per month
AMP0.65%0.0125%0.0125%
ANZ0.625%0.0125%0.0167%
Bankwest0.70%0.0125%0.0208%
Commonwealth Bank0.65%0.0125%0.0167%
Heritage Bank0.65%0.0125%0.0208%
Macquarie0.70%0.0125%0.0188%
NAB0.65%0.0125%0.025%
St.George0.65%0.0125%0.0125%
Suncorp0.65%0.0125%0.0208%
Westpac0.65%0.0125%0.0125%

Clawback of commissions

If a customer refinances the home loan suggested by their broker to another lender within a certain timeframe, then the initial lender can take a clawback commission fee from the broker. This is because it can be costly for a lender to set up a new loan for the customer, and the lender loses out if the customer then decides to discharge the loan.

A few brokers in these situations have opted to pass on the fee to their clients. This is not illegal in Australia as long as they follow the correct guidelines.

It’s estimated that only 1-2% of total loans are subject to clawback each year and therefore it doesn’t represent a major issue for the broking industry, but it’s still important for brokers to educate their customers about how clawback provisions work.

Conflict of interest

Because most brokers receive commissions, a conflict of interest can occur in some cases. For instance, a broker might promote a certain home loan with a lender that offers a handsome commission over one that offers a lower commission, regardless of whether or not it’s the best product for your needs. This is why it's important to talk to your broker about their commission structure.

What are my rights as a client of a mortgage broker?

The National Consumer Credit Protection Act (NCCP) aims to protect you as a client of a mortgage broker by ensuring that the broker does not recommend an ‘unsuitable’ loan to you. This means the broker must carefully consider your needs and requirements, including your financial situation, to ensure that you will be able to service the loan without enduring financial hardship.

The questions you MUST ask your mortgage broker

Compare loans or chat to a broker through the table below

Rates last updated June 23rd, 2018
$
Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.69%
3.69%
$0
$0 p.a.
80%
Get $1,000 cash into a USaver account when you apply for a loan of $200,000 or more (new or refinance). Terms and conditions apply. Enjoy flexible repayments, a redraw facility and the ability to split your loan. Plus, pay no application or ongoing fees.
3.64%
3.66%
$0
$0 p.a.
80%
Pay no ongoing fees and enjoy a flexible repayment schedule, including the ability to make unlimited additional repayments without penalty.
3.69%
3.69%
$0
$0 p.a.
70%
Pay no application or ongoing fees and get a flexible loan with the ability to split up to 6 times.
3.69%
4.11%
$0
$395 p.a.
80%
Save on interest with a 100% offset account and save on other ME products with this package loan.
3.49%
4.49%
$0
$395 p.a.
90%
Loans over $150k get a discount off an already low fixed rate. Available for NSW, Qld and ACT residents only.

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Credit services for Aussie Select, Aussie IQ and Aussie Optimizer products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 ("Aussie"), and its appointed credit representatives. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133 Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Optimizer products is provided by Perpetual Limited ABN 86 000 431 827 (Lender). Credit for Aussie IQ is provided by Macquarie Bank Limited ABN 46 008 583 542 AFSL and Australian Credit Licence 237502. Home loans issued by the Lender are serviced by Macquarie Securitisation Limited ABN 16 003 297 336, Australian Credit Licence 237863 (MSL).

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2018 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

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The Adviser’s number 1 placed mortgage broker 5 years running (2013-2017)

Belinda Punshon

Belinda is a journalist here at finder.com.au. Specialising in the home loans and property sections, she is passionate about helping Australians improve their financial wellbeing.

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2 Responses

  1. Default Gravatar
    karenApril 10, 2018

    Hi! We have been seeing a broker to get all of our financial homework done before applying for a home loan. We have found that our regular banking facility is suitable for us, my question is would we be paying for brokers fees as well as bank fees to set up the loan, or are the set up costs for the loan less if we go directly through our bank?

    • finder Customer Care
      JhezelynApril 10, 2018Staff

      Hello Karen,

      Thank you for your comment.

      Mortgage broker‘s service is usually free because they earn a commission from the lender. Their commissions vary depending on the lender as well as the size of the transaction. It’s better to seek advise from a broker because usually they know which one will work for you. I hope this helps.

      Regards,
      Jhezelyn

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