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If you have ever wondered how mortgage brokers get paid when they never send you an invoice, you are asking the right question. In Australia, a broker is paid by the lender, not by you, in nearly every standard home loan. That arrangement is legal, regulated and disclosed, but it is worth understanding properly, because it shapes how your broker is motivated and what you should ask before you hand over your documents.
Quick answer: Mortgage brokers are paid by the lender, usually as an upfront commission when your loan settles (commonly around 0.65% to 0.70% of the loan plus GST) and a smaller ongoing trail commission (commonly around 0.15% a year of the balance). Most borrowers pay no fee. Since 1 January 2021 brokers must also act in your best interests under the National Consumer Credit Protection Act 2009.
Almost all broker income comes from two lender-paid commissions. Neither is added to your loan as a separate charge, and neither changes the interest rate you are offered. Lenders build the cost of distribution into their pricing, in the same way they do for loans written through their own branches.
The upfront commission is a one-off payment made after your loan settles and your funds are drawn. It is calculated as a percentage of the loan amount, and commonly quoted industry figures sit at roughly 0.65% to 0.70% plus GST. It is generally paid to the broker's aggregator or licensee first, and then shared with the broker under their own arrangement. Brokers are not paid for approvals, only for loans that actually settle.
Trail commission is a smaller recurring payment the lender makes for as long as the loan stays with that lender and the broker remains attached to it. Industry sources commonly cite an average of around 0.15% a year of the outstanding balance, though it varies. It is the reason a good broker keeps in touch after settlement: servicing your loan, reviewing your rate and answering questions is what the trail is meant to fund.
| Type | When it is paid | Typical industry range | Who pays it |
|---|---|---|---|
| Upfront commission | After settlement, once | About 0.65% to 0.70% of the loan, plus GST | The lender |
| Trail commission | Ongoing while the loan is held | About 0.15% a year of the balance | The lender |
| Broker fee (sometimes) | As agreed in writing | Varies, often none | You, if disclosed |
These are commonly quoted ranges, not fixed rates. Actual amounts depend on the lender and on the aggregator the broker belongs to, so ask your broker for the real figures on your loan.
Here is an illustrative example only, using a 0.65% upfront rate and 0.15% trail rate on a $600,000 loan. The percentages are assumptions drawn from commonly quoted industry ranges, not a statement about any particular lender.
Upfront commission: 0.65% of $600,000 is $3,900, plus $390 GST, so $4,290 in total paid by the lender after settlement. Trail commission: 0.15% of $600,000 is $900 in the first year, and it reduces gradually as the balance falls. None of this is added to your loan balance or charged to you.
That commission pays for a lot of unseen work: comparing lenders, structuring the loan, gathering and checking documents, liaising with the credit assessor, chasing the valuation and managing the process through to settlement. Many borrowers are surprised to learn how many hours sit behind a single approval.
The obvious concern with commission-based pay is conflict of interest. Parliament addressed it directly. Since 1 January 2021, mortgage brokers have been legally required under the National Consumer Credit Protection Act 2009 to act in the best interests of the consumer, and to prioritise the consumer's interests if there is a conflict. ASIC regulates this duty and explains how it applies in Regulatory Guide 273.
In practice, brokers must be able to show why a loan was suitable and why it was recommended over alternatives. Conflicted remuneration, such as volume bonuses that reward pushing one lender, is also restricted. If you believe a broker has not met their obligations, you can complain to the broker's firm and then to the Australian Financial Complaints Authority (AFCA).
Lenders can reclaim some or all of the upfront commission if a loan is repaid or refinanced soon after settlement, generally within the first one to two years. The MFAA states that a broker cannot recover this cost from the client. It is the broker's cost, not yours, and it gives brokers a reason to recommend loans that will last rather than loans that look attractive for a few months.
Clawback is also why a reputable broker will talk honestly about whether refinancing again soon after a recent loan makes sense. Our guide to the cost of refinancing a home loan walks through the real numbers on switching.
Most owner-occupier and investment loans involve no charge. Some brokers do charge a fee, usually for work outside the standard path, such as complex self-employed structures, multiple-lender negotiations or deals that need unusual restructuring. If a fee applies, it should be explained and agreed in writing before work starts. A fee is not a red flag in itself, but an undisclosed one is.
Any broker who is comfortable with their process will answer these plainly. If you would like to see how your current rate compares before you speak to anyone, the Mankin Finance rate check gives you a quick benchmark, and our calculators and tools let you test repayment scenarios yourself. Michael and the team are always glad to share exactly how we are paid on a given loan, and we have earned 130+ five-star Google reviews by being open about it.
A bank's own staff are paid salaries and sometimes incentives, and the bank recovers that cost through its pricing. A broker is paid commission from the same margin. The rate on a given product is generally the same whichever door you walk through, so the more meaningful comparison is choice. A branch can only recommend its own products, while a broker can compare a panel of lenders. Our recent look at the gap between lenders after the latest rate rise shows how much that choice can be worth. For more general questions, see our frequently asked questions.
Run your current loan through the rate check to see whether a different lender could save you money, with no obligation.
In most cases no. The lender pays the broker a commission once your loan settles, so there is usually no fee to you. Some brokers charge a fee for complex or non-standard work, such as a deal that needs a lot of structuring, and if they do it should be disclosed in writing before you commit. Always ask the question directly at the start.
Upfront commission is commonly quoted at around 0.65% to 0.70% of the loan amount plus GST, and trail commission at around 0.15% a year of the outstanding balance. The exact figures vary by lender and by the broker's aggregator arrangement, so treat those as typical industry ranges rather than fixed rates. You are entitled to ask your broker what they will receive from each lender they recommend.
Commission is calculated on the loan amount, so a larger loan does produce a larger payment. That is exactly why the Best Interests Duty exists. Since 1 January 2021 brokers must act in your best interests and prioritise your interests over their own, and recommend a loan that is suitable for you, not the largest one a lender will approve.
Lenders can reclaim some or all of the upfront commission if a loan is repaid early, typically within the first one to two years. This is called clawback. According to the MFAA, a broker cannot recover that cost from the client, so you should not be charged for it. Ask about it anyway, because it explains why brokers care about loans that suit you for the long term.
Not on the lender's published rate. Broker commission is paid out of the lender's own margin, and lenders price loans the same way whether they come through a branch or a broker. The real cost difference comes from the product you end up with, which is why comparing a broad panel of lenders matters more than who pays whom.
Disclaimer: This article is general information only and does not constitute financial, mortgage, or credit advice. Commission figures are commonly quoted industry ranges and the worked example is illustrative; actual amounts vary by lender and arrangement. Before making any decision about your loan, you should speak with a qualified mortgage broker or financial adviser who can assess your specific situation. Mankin Finance Pty Ltd holds Australian Credit Licence 389087.
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