Key Takeaways
- Mortgage brokers are paid by lenders, not borrowers — the service costs you nothing
- Upfront commission is typically 0.55–0.65% of the loan amount, paid at settlement
- Trail commission of ~0.15% per year is paid monthly on the remaining balance
- Clawbacks mean brokers lose commission if you refinance within 12–24 months
- Your interest rate is the same whether you use a broker or go direct
- Brokers must act in your best interests under the Best Interests Duty
One of the most common questions we hear is: "If using a mortgage broker is free, how do you actually make money?" It's a fair question, and transparency around how brokers are compensated is something we actively encourage. Understanding broker pay helps you make an informed decision about whether to use one.
In short: lenders pay brokers a commission when a loan settles. You pay nothing directly. But there's more nuance worth understanding, including why this structure actually aligns broker interests with yours — more than most people realise.
The Two Types of Commission
Upfront Commission
When your home loan settles, the lender pays your broker an upfront commission. This is calculated as a percentage of the loan amount — typically between 0.55% and 0.65% of the net loan balance (loan amount minus offset account balance).
On a $600,000 loan at 0.60%, this equals $3,600. The lender pays this — it doesn't come out of your loan or increase your rate.
Trail Commission
From the month after settlement, the lender also pays the broker a small ongoing "trail" commission each month. This is typically around 0.15% per annum of the outstanding loan balance, paid monthly.
On a $600,000 loan, trail commission is approximately $900 per year, declining as you pay down the principal. Trail compensates the broker for providing ongoing service — annual loan reviews, rate negotiations, and support over the life of your loan.
Example: On a $700,000 loan, a broker earns approximately $4,200 upfront and around $1,050 per year in trail — declining as the balance reduces. Over the full life of a 30-year loan, total trail earned would be significantly less than the upfront payment.
Commission Rates by Lender Type
Commission rates vary between lenders. Here's a general guide to what brokers typically receive across different lender types:
| Lender Type | Upfront Commission | Trail Commission (p.a.) |
|---|---|---|
| Major Banks (Big 4) | 0.55% – 0.65% | 0.15% – 0.20% |
| Second-Tier Banks | 0.55% – 0.70% | 0.15% – 0.20% |
| Non-Bank Lenders | 0.55% – 0.75% | 0.15% – 0.25% |
| Credit Unions / Mutuals | 0.50% – 0.60% | 0.10% – 0.15% |
Importantly, commission rates between lenders are relatively similar. Brokers are not incentivised to put you with a higher-commission lender at the expense of your outcomes — and under the Best Interests Duty, they are legally required to put your interests first.
What is a Clawback?
A clawback is when the lender takes back some or all of the upfront commission it paid the broker, because the loan was repaid or refinanced too soon after settlement.
Most lenders apply clawbacks on the following schedule:
- Loan discharged within 12 months of settlement: 100% clawback
- Loan discharged between 12–18 months: 50% clawback
- Loan discharged between 18–24 months: 25% clawback (varies by lender)
- After 24 months: no clawback
Why Clawbacks Matter to You
Clawbacks create a strong incentive for brokers to place you with the right lender for the long term, not just the easiest approval. A broker who puts you somewhere unsuitable risks losing their entire commission if you refinance within two years. This aligns the broker's financial interest directly with yours.
Does Using a Broker Cost More?
No. Your interest rate, loan fees, and terms are identical whether you apply directly through a lender or via a broker. The commission the broker receives is built into the lender's overall cost of distribution — it replaces the cost of running branch networks, advertising, and internal sales staff.
In fact, brokers can often negotiate better rates or access products not available to direct applicants, because they bring volume to lenders and have established relationships with credit teams.
The Real Value of a Broker
A borrower who went direct to their bank was offered 6.54%. We compared 60+ lenders and found a better-suited product at 6.09% — saving $2,700 per year on their $600,000 loan. The broker service cost them nothing and saved them thousands annually.
The Best Interests Duty
Since January 2021, mortgage brokers in Australia are legally required to act in the best interests of their clients under the Best Interests Duty (BID). This means:
- The broker must prioritise your interests over their own or the lender's
- They must consider your full circumstances, not just approve the easiest loan
- They must document why the recommended loan is in your best interest
- Commission structures cannot be the primary driver of loan recommendations
This is a significant consumer protection. Combined with clawback provisions, it creates strong structural alignment between broker and borrower interests.
Disclosure: What We Tell You
As a licensed credit representative, we are required to disclose our commission to you in writing before you proceed with any loan application. You'll receive a Credit Proposal Document outlining the recommended loan and a Credit Guide explaining how we are remunerated.
We believe in full transparency. If you'd like to know the exact commission we'll receive on any loan we recommend, just ask — we'll tell you before you commit to anything.
Frequently Asked Questions
No. Mortgage brokers in Australia are paid by the lender, not the borrower. When your loan settles, the lender pays the broker an upfront commission. You pay nothing directly to the broker.
Upfront commission is typically 0.55–0.65% of the loan amount (excluding offset balances), paid by the lender at settlement. On a $600,000 loan this is approximately $3,300–$3,900. Brokers also receive ongoing trail commission of around 0.15–0.20% per year on the remaining loan balance.
Trail commission is an ongoing payment the lender makes to the broker each month, typically around 0.15% per annum of the outstanding loan balance. It compensates the broker for ongoing service, annual reviews, and support provided over the life of the loan.
A clawback occurs when a borrower refinances or repays their loan within 12–24 months of settlement. The lender reclaims some or all of the upfront commission from the broker. This is why brokers have a genuine interest in placing you with the right lender long-term.
No. Lender rates are the same whether you apply directly or through a broker. The commission is built into the lender's cost of doing business — it replaces the cost of running their own branch network and sales staff. You don't pay more by using a broker.
Work With a Broker Who's Transparent
We'll always tell you exactly what we earn before you commit to anything.
