How Are Mortgage Brokers Paid? Commissions Explained (2026)
In Australia, mortgage brokers are generally paid by lenders through commissions — not by borrowers. This means the broker’s service is typically free to you. However, understanding how broker commissions work helps you evaluate whether a recommendation is truly in your best interest.
Since 2021, mortgage brokers are legally required to act in the best interests of their clients — not recommend products based on which pays the highest commission. Here is how it all works.
The Two Types of Commission
1. Upfront Commission
Upfront commission is paid by the lender to the broker once your loan settles (completes). It is calculated as a percentage of the loan amount.
Typical upfront commission rate: 0.50%–0.65% of the loan amount (excluding LMI capitalised)
Example: On a $700,000 loan at 0.6% commission, the lender pays the broker $4,200 when your loan settles.
This commission is paid by the lender — not added to your loan balance or interest rate.
2. Trail Commission
Trail commission is an ongoing payment made by the lender to the broker for as long as your loan remains active with that lender. It is calculated on the outstanding loan balance each year.
Typical trail commission rate: 0.15%–0.25% per annum of outstanding balance
Example: On a $600,000 outstanding balance at 0.175% trail, the lender pays the broker approximately $1,050 per year.
As you pay down your loan, the trail payment reduces. If you refinance to a different lender, the original broker stops receiving trail — though they may earn upfront commission if they arrange the new loan.
Commission Rates by Lender Type
Rates vary between lenders — but differences are not dramatic:
| Lender type | Typical upfront | Typical trail |
|---|---|---|
| Big Four banks | 0.55%–0.65% | 0.15%–0.20% |
| Mid-tier banks | 0.55%–0.65% | 0.15%–0.25% |
| Non-bank lenders | 0.50%–0.65% | 0.15%–0.25% |
Commission structures change from time to time. Some lenders run promotional upfront commission offers.
The Clawback Provision
If you repay or refinance your loan within 1–2 years of settlement, the lender will “claw back” the upfront commission from the broker. This protects lenders from brokers churning loans for commission.
Typical clawback windows:
| Period | Clawback |
|---|---|
| 0–12 months from settlement | 100% of upfront commission |
| 12–18 months from settlement | 50% of upfront commission |
| 18–24 months from settlement | 25% of upfront commission (varies by lender) |
| After 24 months | No clawback |
What this means for you: If your broker recommends you refinance within 12–18 months, they will be “giving back” part of their commission. This creates an unintended incentive not to recommend refinancing when it may genuinely benefit you — though the best interests duty requires them to do so if it is the right outcome.
Some brokers may pass clawback costs on to clients in certain circumstances — this must be disclosed in their Credit Guide.
Aggregator Splits
Most mortgage brokers do not operate their own Australian Credit Licence directly. They operate under an aggregator — a larger company that holds the ACL, provides technology platforms, lender relationships, and compliance support.
The aggregator takes a portion of commissions the broker earns. Typical aggregator/broker splits range from 80/20 to 90/10 (broker/aggregator).
Major Australian aggregators: AFG, Connective, FAST, Vow Financial, PLAN Australia, Choice Aggregation.
Volume Bonuses — A Past Issue
Until 2020, some lenders offered volume-based bonuses to aggregators or brokers who settled a certain loan volume — creating a potential incentive to use that lender more than warranted. These volume bonuses were substantially curtailed following the Hayne Royal Commission (2019) and subsequent ASIC reforms. Most volume-based incentives (other than standard commission) have been removed from broker remuneration.
Fee-for-Service Brokers
A small number of brokers charge a fee-for-service rather than relying solely on commission. This fee — typically $1,000–$3,000 — may be charged for:
- Complex applications where significant work is required regardless of outcome
- Specialist scenarios (SMSF, non-resident, commercial, low-doc)
- Upfront planning advice separate from the application
If a broker charges a fee-for-service, they must disclose this clearly. Some fee-for-service brokers also rebate commission back to the client.
Does Commission Affect Your Rate?
Commission paid to brokers is funded by lenders as a cost of distribution. It does not directly affect your interest rate — the same rate is generally available through direct and broker channels for most products.
However, lenders who operate primarily through direct channels (without broker networks) sometimes pass distribution cost savings to borrowers through slightly lower rates. This is a product-specific consideration — not a general rule.
Your Rights Around Commission Disclosure
Since April 2021, mortgage brokers must provide you with a Credit Proposal Disclosure that clearly states:
- The amount of upfront commission they will receive (in dollar terms if known, or as a range)
- The ongoing trail commission amount or rate
- Any other benefits they may receive
- Whether any referral fees have been paid to refer you to the broker
You have the right to ask about any aspect of how your broker is paid before proceeding.
Frequently Asked Questions
Does my broker get paid if my application is declined?
No. Upfront commission is only paid when the loan settles. If your application is declined or you do not proceed, the broker is not paid — even for the work they’ve done.
Should I be worried that my broker recommends higher-commission lenders?
The best interests duty (since April 2021) requires brokers to recommend the loan most suitable for your needs — regardless of commission. Brokers must document their reasoning. If you are concerned, ask your broker to explain why they recommended a specific lender and what alternatives they considered.
What happens to my broker’s commission when I refinance?
If you refinance to a new lender within 1–2 years, the original lender claws back some or all of the upfront commission from your broker. If you refinance after 2 years, the original trail commission stops but typically no clawback applies. If your broker helps you refinance to a new lender, they earn a new upfront commission from the new lender.
Do online brokers charge differently?
Online brokers such as Lendi and Tiimely (formerly Tic:Toc) operate on the same commission model as traditional brokers. Some digital platforms rebate a portion of commission back to the client — check their product disclosure.
Related Guides
- How Mortgage Brokers Work
- Mortgage Broker Best Interests Duty
- Mortgage Broker vs Bank
- Questions to Ask Your Mortgage Broker
- Mortgage Brokers Hub
This article provides general information about mortgage broker remuneration in Australia. Commission rates and structures change over time. For a specific breakdown of commissions that apply to your loan, request a Credit Proposal Disclosure from your broker. Find a licensed mortgage broker through MoneySmart.