The Short Version

In Australia, most mortgage brokers charge borrowers nothing. They are paid by the lender that ultimately writes your loan: an upfront commission (a percentage of the loan amount) plus a smaller trailing commission each year the loan remains. This is disclosed in the credit guide every broker must give you.

Free does not mean incentive-free, though — and knowing where the incentives sit is the difference between using a broker well and being used by one.

Upfront and Trail, Explained

The upfront commission is typically a fraction of one percent of the drawn loan amount, paid by the lender at settlement. The trail is a smaller ongoing percentage paid while the loan stays alive and in good order. Neither comes out of your pocket directly — lenders build acquisition costs into their business the same way they fund branches.

Since the reforms that followed the banking Royal Commission, brokers also operate under a Best Interests Duty — a legal obligation to act in the borrower''s best interests when recommending loans, which bank staff notably do not carry.

Clawbacks — the Incentive You Should Know About

If you repay or refinance a loan early (commonly within the first two years), the lender claws back some or all of the broker''s upfront commission. Two consequences worth understanding:

  1. Some brokers pass clawback costs to clients via an agreement — ask directly whether any fee applies if you exit early, and get it in writing.
  2. Clawbacks give brokers a mild incentive against recommending you refinance again quickly, even when rates move in your favour. A good broker discloses this tension; a great one reviews your loan anyway.

When Brokers Do Charge Fees

A minority charge a fee-for-service — common for complex commercial deals, very small loans, or specialist scenarios where commissions do not cover the work. This is legitimate when disclosed upfront in writing. What should concern you is a fee that appears late in the process, or a broker who cannot explain clearly what the lender is paying them.

The Questions That Keep Everyone Honest

  • What commission will you receive from the lender you are recommending, upfront and trail?
  • Do you charge me anything, now or if I exit the loan early?
  • How many lenders are on your panel, and how many did you actually compare for me?
  • Why this lender over the two next-best options?
Every broker must answer the first question — commission disclosure is required. The last question is the revealing one: a broker acting in your interests can articulate the comparison they ran.

The Bottom Line

The commission model mostly works in borrowers'' favour — you get professional loan selection without a bill, and the Best Interests Duty tilts the law to your side. The residual risks are concentration (brokers can favour familiar lenders) and clawback friction. Both are neutralised by asking the four questions above and comparing more than one broker before engaging.

This article is general information only — not credit assistance, credit advice or financial advice. Commission structures and regulations change; verify current arrangements directly with any broker you engage.