If you have ever wondered whether a mortgage broker is really "free" — or whether there is a catch — you are not alone. It is one of the most common questions we hear at our Coburg North office, and one that deserves a genuinely transparent answer. Here is exactly how brokers earn their money in Australia, including the parts most broker websites skip.
Do Mortgage Brokers Charge You a Fee in Australia?
In the vast majority of cases, no — you pay nothing out of pocket. The lender (bank, credit union or non-bank) pays the broker a commission after your home loan settles. MFAA data shows that around 85 per cent of Australian brokerages have a policy of charging borrowers zero direct fees. At Integrated Finance Group, our residential home loan service carries no fee to you — the lender pays us, and we disclose the exact dollar amount before your application is submitted.
There are limited exceptions. A broker may charge a direct fee when the loan is very small (under $450,000, where the lender's commission does not cover the work involved), when the borrower's situation is genuinely complex (low-doc, adverse credit or private lending), or when a specialist lender does not pay broker commissions at all. If a fee applies, Australian law requires your broker to set it out in a Credit Quote document before any work begins — and you must sign it. If your broker has not given you a Credit Quote, they are not charging you.
How Much Commission Does a Mortgage Broker Earn?
Broker commission has two components — an upfront payment at settlement and a smaller ongoing trail. Both are paid by the lender, not by you. The rates are broadly standardised across the industry following reforms triggered by the 2017–18 Royal Commission into Financial Services.
| Commission type | Typical range (+ GST) | Example on a $600,000 loan | Paid by |
|---|---|---|---|
| Upfront commission | 0.55% – 0.70% | $3,300 – $4,200 | Lender |
| Trail commission (annual) | 0.10% – 0.20% | $600 – $1,200 per year | Lender |
| Direct fee to borrower | $0 (standard residential) | $0 | You |
The upfront commission is a one-off payment, typically received six to eight weeks after settlement. Trail is paid monthly or quarterly for as long as the loan remains active with that lender — if you refinance or pay the loan off, trail stops immediately.
To put those numbers in Melbourne context: on a median-price house purchase in the north-west corridor — say $950,000 with a 20 per cent deposit and a $760,000 loan — the lender might pay the broker roughly $4,560 upfront (at 0.60 per cent) and around $1,140 per year in trail (at 0.15 per cent). You can run your own numbers using our borrowing power calculator to see where your loan amount would land.
What Is the Best Interests Duty and How Does It Protect You?
Since 1 January 2021, every mortgage broker in Australia has been required by law to act in your best interests when providing credit assistance. This obligation — the Best Interests Duty — sits under Part 3-5A of the National Consumer Credit Protection Act 2009 and is enforced by ASIC under Regulatory Guide RG 273.
In practical terms, it means your broker must recommend the loan that suits your needs and objectives — not the loan that pays the highest commission. Where a conflict of interest exists, your broker must resolve it in your favour or not act at all. They must also give you a Credit Proposal Disclosure that states the exact dollar amount they will earn from your loan, who pays it, and whether any ownership relationship exists between their business and a lender or aggregator.
What the BID means for you in practice: If Lender A offers a rate of 5.99 per cent and pays the broker $4,800 in commission, while Lender B offers 5.79 per cent and pays $4,200, your broker is legally required to recommend Lender B — because it is in your best interest. Commission rates across major lenders are now close enough that this scenario is uncommon, but the law exists to eliminate it entirely.
What Happens If You Refinance Within Two Years?
This is one of the most important topics in broker pay — and the one most broker websites gloss over. Lenders pay upfront commission on the assumption that the loan will stay active for at least 18 to 24 months. If you refinance, repay or discharge the loan before that period ends, the lender claws back some or all of the commission from the broker.
The typical clawback structure looks like this:
| If the loan is discharged within | Lender claws back |
|---|---|
| Year 1 (0–12 months) | 100% of upfront commission |
| Year 2 (13–24 months) | 50% of upfront commission |
| After 24 months | Nothing |
Here is the part that matters to you: some brokers include a clause in their client agreement that passes the clawback cost on to the borrower. That means if you refinance in month ten, you could receive an invoice from your broker for the full upfront commission — potentially $3,000 to $5,000.
At IFG, we absorb clawback as a business cost and do not pass it on to our clients. But we strongly recommend you ask any broker you are considering: "If I refinance within two years, will I owe you anything?" If the answer is anything other than "no", get it in writing and factor it into your decision.
This is also why a broker who recommends refinancing every 12 months to chase a cashback offer may not be acting in your long-term interest — they know the clawback risk and may be prioritising short-term wins over a sustainable loan structure. A good broker structures your loan so that you do not need to refinance frequently. If you are weighing up whether refinancing makes sense, the savings need to justify a minimum two-year horizon.
Can a Broker Get You a Better Rate Than Going Direct to a Bank?
In most cases, yes — and the data supports it. ASIC's review of mortgage broker remuneration found that broker-originated loans carry interest rates that match or beat those offered to customers who walk into a bank branch directly. The reason is straightforward: when you visit one bank, you receive one offer. A broker compares options across a deliberately broad panel of bank, non-bank and specialist lenders and makes them compete for your business.
Brokers also access pricing that is not always available to walk-in customers. Lenders frequently offer "broker channel" specials — sharper rates designed to attract business through the intermediary channel. Your broker's relationship with each lender's Business Development Manager gives them leverage to negotiate rate reductions, fee waivers and package discounts that a branch staff member simply cannot authorise.
The numbers tell the story: 81 per cent of all new Australian residential home loans in the March 2026 quarter were settled through a mortgage broker, according to MFAA and Cotality data. That is up from 55 per cent in 2018. Borrowers are voting with their feet — and they are choosing brokers because the outcome is better.
Melbourne example: A first home buyer purchasing a $750,000 apartment in Coburg with a 10 per cent deposit needs a $675,000 loan plus LMI. Going direct to one of the big four, they might be offered the standard variable rate. A broker can compare that against 40-plus products across the panel, identify a non-bank lender offering 0.30 per cent less with a free offset account, and save the buyer roughly $2,000 per year in interest — without costing them a cent in broker fees.
Does the Commission Affect Your Interest Rate?
No. This is the most persistent myth in home lending, and it is worth addressing directly. Lenders treat broker commissions as a distribution cost — the same category of expense as branch rent, staff salaries and advertising. When you walk into a bank branch, the bank pays its loan officer a salary, superannuation and bonuses to originate your loan. When you use a broker, the bank pays a commission instead. Either way, the bank is paying to acquire your business.
The interest rate you receive is determined by the lender's credit assessment of your application — your income, deposit, loan-to-value ratio, employment type, credit history and serviceability — not by whether you came through a broker or a branch. In fact, brokers who bring well-packaged, fully documented applications often receive faster turnaround times and more favourable pricing from lender credit teams.
What Should You Ask Your Broker Before Signing?
Transparency goes both ways. A broker who is confident in their value will welcome these questions — and if they hesitate, that tells you something too. Before you commit, ask:
1. "How are you paid, and how much will you earn on my loan?" — Your broker is legally required to disclose this in writing, but asking the question early signals that you are an informed borrower and sets the tone for an honest relationship.
2. "Do you charge a direct fee for any reason?" — If yes, they must provide a Credit Quote. If no, confirm it in writing.
3. "Will I owe you anything if I refinance within two years?" — This is the clawback question. Get a clear answer.
4. "How many lenders are on your panel, and are any of them related to your aggregator?" — Most brokers sit under an aggregator (a network that provides lender access, technology and compliance support). Some aggregators are partly owned by major banks. This does not automatically create bias — the Best Interests Duty still applies — but you deserve to know the structure.
5. "What happens after settlement — do you do annual rate reviews?" — Trail commission is designed to fund ongoing service. If your broker does not proactively review your rate each year, they are collecting trail without earning it. At IFG, we conduct annual rate reviews for every client and reach out when we identify a saving — because that is what trail commission is supposed to pay for.
If you are a first home buyer navigating this for the first time, our guides section walks through each step of the lending process, and our Victorian stamp duty calculator helps you budget for the full cost of purchase — not just the loan.
Why IFG Tells You All of This
We publish this because we believe transparency is the foundation of trust — and trust is the foundation of a 20-year client relationship. Brian and Frank have been in business banking since 2003, formerly at NAB, with 45-plus years of combined experience. They have seen every commission structure, every aggregator model and every industry reform. They choose to run IFG as a boutique, director-led brokerage because it means every client gets a director on their file — not a junior.
If you want to understand how your broker is paid, you should. If you want to see the exact commission disclosure on your loan before it is submitted, you will. And if you have a question about any of this, enquiries are answered the same business day — by a director.
Ready to Talk to a Broker Who Shows You Everything?
Book a free 15-minute strategy call with Brian or Frank — no obligation, no fees to you. We will show you exactly what the lender pays us on your loan, in writing, before anything is submitted.
- Is it really free to use a mortgage broker in Australia?
- For standard residential home loans, yes. The lender pays the broker a commission after settlement — you pay nothing. Fees may apply for very small loans (under $450,000), complex scenarios or specialist lenders that do not pay commission. Any fee must be disclosed in a Credit Quote before work begins.
- How do I know my broker is not recommending the loan that pays them the most?
- The Best Interests Duty (in force since 1 January 2021) makes it illegal for a broker to prioritise their commission over your needs. Your broker must also give you a Credit Proposal Disclosure showing the exact dollar amount they earn. Commission rates across major lenders are now so similar that the difference is typically less than $200 on a $600,000 loan.
- What is a clawback and could it cost me money?
- If you refinance or discharge your loan within 12 to 24 months, the lender claws back some or all of the upfront commission from the broker. Some brokers pass this cost on to borrowers via a clause in their client agreement. Always ask your broker whether you would owe anything if you refinance early — and get the answer in writing.
- Do brokers have access to better rates than banks offer directly?
- ASIC data shows broker-originated loans carry rates that match or beat direct-to-bank rates. Brokers access "broker channel" specials, negotiate with lender BDMs, and make multiple lenders compete for your business — something a single bank branch cannot do. In the March 2026 quarter, 81 per cent of all new Australian home loans were settled through a broker.
General information only. This article does not constitute personal financial advice. Your full financial situation would need to be reviewed before any recommendation is made. Credit Representative 485802 is authorised under Australian Credit Licence 391237.