How Mortgage Brokers Get Paid (And What It Means for You)

—

Most Aussies use a broker to get their mortgage. Brokers don’t typically charge you directly. They get paid by the lender. Understanding this structure tells you whose interest they’re actually serving.

How Broker Commissions Work

Upfront commission: Paid at settlement

Typical: 0.5–0.7% of the loan amount
Example: $500k loan = $2,500–3,500 to broker

Trail commission: Paid monthly while the loan exists

Typical: 0.15% per year of remaining loan balance
Example: $500k loan = $750/year ongoing

So a single $500k loan can generate $10,000+ in commissions over its life.

Why This Matters

Lenders that pay higher commissions get more broker recommendations. Lenders that pay lower commissions get less. The structure incentivizes brokers to:

Favor higher-commission lenders (mild conflict of interest)
Recommend bigger loans where appropriate (financial alignment with borrowers)
Keep loans alive longer (their trail commission grows with balance)

The Best Interests Duty

Since 2020, Australian brokers have a legal Best Interests Duty — they must act in your interests, not the lender’s. This curtailed some of the worst commission-chasing behavior.

In practice:

Brokers must document reasons for recommendation
Records must show alternatives considered
Customers have stronger complaint rights

How to Get Real Independence

Even with Best Interests Duty:

Ask brokers to disclose all lenders on their panel (not just the ones they recommend)
Ask for the comparison rate of the 3 best matches, not just the top recommendation
Ask why the recommended option vs the next 2
Verify online — does the broker’s recommendation match Canstar/Mozo top results?

Independent Mortgage Brokers vs Tied Brokers

Tied brokers: Salaried employees of one lender (e.g., NAB Home Loans). Limited to that lender’s products.

Aggregator brokers: Use a panel of 20–40+ lenders. The standard “independent” broker most consumers use.

Direct fee brokers: Charge a flat fee (sometimes called “fee-for-service”). Some refund commissions to the client. Genuinely independent. Rare but worth seeking out.

Red Flags

Broker won’t disclose panel or commission structure
Recommendation feels rushed
Pushing toward a single lender repeatedly
Won’t put recommendation rationale in writing
Encouraging maximum borrowing capacity rather than your stated comfort

When NOT to Use a Broker

You’re locked-in to one lender (loyalty, employer relationship, etc.)
You have a simple, prime profile where direct-to-bank is faster
You want truly independent advice — pay for a fee-for-service broker or financial advisor

How to Find a Good Broker

Personal referrals from people who’ve held loans 5+ years (not just bought recently)
Industry credentials: MFAA or FBAA membership
Online reviews — particularly negative ones for patterns
Has the broker held a license for 5+ years? Stability matters.

💡 Pro Tip: Use a broker for your first home loan. Once you understand the process, you can compare quotes and approach lenders directly for future refinances.