It is the question we get asked in nearly every first conversation, usually followed by a slightly suspicious pause. If the broker is not charging me, who is paying for all of this?

Fair question. The short version is that for most residential home loans you do not pay your broker anything. The lender does. The longer version is worth knowing, because it also tells you what to watch for.

How a broker gets paid

When a loan settles, the lender pays the broker a commission. That is the reason you are not handed an invoice. The broker has done the legwork of collecting your documents, choosing a lender, preparing the application and chasing it through to settlement, and the lender pays for that because it has gained a customer.

Most lenders also pay a smaller ongoing amount, often called trail commission, for as long as the loan stays with them. That is part of why a good broker keeps an eye on your loan after settlement, and why it is fair to ask them what they will actually do for it in year two or year five.

What you should be told before you proceed

A broker has to give you a credit guide up front. It sets out who they are, which lenders they use and how they are paid. Before they recommend a loan they also have to put the commission details in writing. If you have not seen either, ask for them.

Since 2021 brokers have also been under a legal best interests duty. In plain terms, the recommendation has to suit your situation, not whichever lender pays most. Our guide to choosing a mortgage broker has a list of questions that put that to the test.

Does the commission make the loan dearer?

Not in the way people tend to assume. The lender pays commission out of its own margin, and the rate it offers does not depend on whether you came through a broker or walked into a branch. What does change is the range you get to compare. For the longer version, read mortgage broker or your bank.

What is clawback?

If a loan is repaid or refinanced away soon after settlement, usually within the first couple of years, the lender can take some or all of the commission back from the broker. It exists to discourage churning, where loans are moved around for the sake of a fresh commission.

As a client you do not normally pay anything because of clawback. But it is a useful reason to be wary of anyone pushing you to switch lenders again and again, and a useful thing to ask about if you are thinking of refinancing soon after a purchase.

When you might pay a fee

A fee is not unusual in a few cases, and it should always be agreed with you before the work starts:

  • Commercial and business lending. These loans often pay less or differently, and the work can be heavier, so some brokers charge a fee.
  • Complex or specialised structures. Lending through a trust or SMSF, or a deal that needs a lot of lender negotiation, can take a great deal more time.
  • Advice-only work. A broker asked for a review or strategy session with no loan at the end may charge for their time.

If someone quotes a fee on a standard home loan, ask what it covers and whether the lender is also paying them. You are entitled to a straight answer.

The costs that are not the broker's

Whatever route you take, a home loan has costs that exist regardless of who arranges it: lender application or valuation fees (often waived), government charges on a purchase, Lenders Mortgage Insurance if your deposit is small, and any break costs if you are leaving a fixed rate. A broker should tell you what to expect for your particular loan, not leave you to find out at settlement.

How we do it at Sabea

For most residential home loans there is no cost to you. We are paid a commission by the lender once the loan settles, and we put that in writing before you decide to go ahead. Some commercial or specialised lending carries a fee, and where it does we agree it with you first. If you want the detail on your own situation, talk to a Sabea broker or call 1300 001 755. We are licensed credit advisers in Forestville, working with clients across the Northern Beaches and North Shore.

Frequently asked questions

Do I pay a mortgage broker anything?

For most residential home loans, no. The lender pays the broker a commission after the loan settles. Some commercial or specialised lending carries a fee, which should be agreed with you in advance.

What is trail commission?

A smaller ongoing payment some lenders make to the broker for as long as your loan stays with that lender. It is paid by the lender, not added to your repayments.

Can a broker charge me and the lender as well?

It can happen, which is why you should ask. A broker has to disclose how they are paid in their credit guide and in writing before you proceed. If anything is unclear, ask for it in writing.

What happens if I refinance soon after settlement?

The lender may claw some of the commission back from the broker. You do not normally pay for that yourself, but tell your broker early if you think you might move the loan.

General information only. It does not take your objectives, financial situation or needs into account, and it is not credit or financial advice. Lender policy, rates and eligibility change regularly and vary between lenders — talk to us about your own circumstances before acting on anything here.