One of the most common questions we hear at Integrated Finance Group is: "If using a broker is free, how does the broker actually get paid?" It is a great question, and one that every borrower deserves a clear answer to before working with any broker. Understanding how broker remuneration works puts you in a stronger position to ask the right questions and make confident decisions.

In Australia, mortgage brokers are paid by lenders — not by the borrowers they help. This means you generally receive our research, strategy, application support and negotiation at no direct cost to you. Here is exactly how the commission model works, what safeguards are in place, and what questions you should always ask your broker upfront.

The short answer: Mortgage brokers in Australia are paid by lenders via upfront and trail commissions. You do not pay the broker directly in most standard home loan scenarios. Regulatory obligations — including Best Interests Duty — are designed to ensure your broker recommends what is right for you, not what earns the highest commission.

Upfront Commission: What It Is and How It Works

When your loan settles, the lender pays your broker a one-time upfront commission. This is calculated as a percentage of the loan amount settled — typically based on the net loan amount (i.e., the loan balance minus any offset account funds). The exact percentage varies between lenders but is generally consistent within a range across the market.

For example, on a $700,000 home loan, an upfront commission might be around 0.65% of the settled amount, net of offset. That payment comes entirely from the lender — it is built into their cost of doing business — and does not affect the interest rate or fees you pay on your loan.

Importantly, upfront commissions are disclosed to you. Under the National Consumer Credit Protection Act and Best Interests Duty requirements, brokers must disclose the commissions they receive (or are likely to receive) in their Credit Assistance Proposal and Credit Quote documentation.

Trail Commission: Ongoing Remuneration Explained

In addition to the upfront payment, most lenders also pay brokers a trail commission — a smaller, ongoing payment made each year the loan remains active. Trail is typically calculated as a percentage of the outstanding loan balance (not the original loan amount), meaning it reduces over time as you pay down the principal.

Trail commission serves an important purpose: it compensates brokers for the ongoing service they provide to clients throughout the life of the loan — reviewing your loan annually, monitoring rate movements, helping with top-ups or refinancing when the time is right, and being available when your circumstances change. A broker who earned only an upfront commission would have less financial incentive to stay in contact after settlement.

Trail commission is also fully disclosed and must be outlined in your broker's documentation at the time of providing credit assistance.

Clawback Provisions: What Happens If You Refinance or Repay Early

If you repay your loan or refinance to another lender within a short period of settlement — typically 12 to 24 months — the lender may claw back some or all of the upfront commission from your broker. Clawback provisions vary between lenders and reduce on a sliding scale: the sooner you repay, the higher the clawback amount.

This is worth understanding for two reasons. First, it means your broker has a financial interest in you staying with the loan for at least the clawback period. Second, if you know you are likely to sell the property or refinance quickly, it is worth discussing this openly with your broker so they can factor it into their recommendation — and so there are no surprises later.

At IFG, we always discuss your intended holding period as part of our initial strategy conversation. If a short-term loan is the right fit, we recommend it — even where clawback risk exists — because our obligation under Best Interests Duty is to you, not to protecting our commission.

Best Interests Duty: Your Regulatory Protection

Best Interests Duty (BID) is a legal obligation introduced under the National Consumer Credit Protection Act that requires mortgage brokers to act in the best interests of their clients — placing your interests ahead of those of lenders and ahead of their own commercial interests.

Under BID, your broker must:

  • Prioritise your interests when providing credit assistance
  • Consider a range of loan products from multiple lenders (not just a preferred panel)
  • Recommend a loan that is genuinely suitable for your individual circumstances and objectives
  • Disclose all commissions, fees and potential conflicts of interest
  • Document why the recommended loan is in your best interests

BID is enforced by ASIC and applies to all mortgage brokers holding a credit licence or acting as a credit representative. As a credit representative under BLSSA Pty Ltd (ACL 391237), Brian and Frank at IFG are bound by this obligation in every client interaction.

Lender-Paid vs. Fee-for-Service Brokers

The large majority of Australian mortgage brokers operate on the lender-paid commission model described above. A smaller number operate on a fee-for-service basis, where the borrower pays the broker directly (often several thousand dollars) in exchange for advice and application services — with commissions rebated or not received.

Neither model is inherently superior. Fee-for-service brokers argue there is a cleaner separation from lender influence. Commission-based brokers (the industry norm) point out that BID already addresses this concern, and that fee-for-service creates an access barrier for first home buyers or borrowers with tighter budgets.

IFG operates on the standard lender-paid model, which means our services are available to all clients at no direct cost. We believe BID provides meaningful protection and we welcome questions about our commissions and how we select lenders for your situation.

What You Should Always Ask Your Broker

Transparency is the foundation of a good broker relationship. Before proceeding with any broker, we encourage you to ask:

  • How many lenders do you have on your panel?
  • What upfront and trail commission will you receive on the loan you are recommending?
  • Is there any reason you are recommending this lender over others on your panel?
  • How do you handle clawback situations if I need to refinance early?
  • Do you receive any other incentives, bonuses or non-monetary benefits from lenders?

A good broker will answer these questions directly and without hesitation. At IFG, we provide full commission disclosure in our written documentation and are happy to walk through our panel selection and rationale with any client who asks.

Do Brokers Get Better Rates Than Going Direct to a Bank?

In many cases, yes — but not because the broker receives a special rate. Brokers bring volume to lenders, which gives them the ability to negotiate pricing on behalf of clients. More importantly, a broker who has searched across a panel of lenders can identify competitive products that a borrower going directly to their own bank would never see. The value is in the comparison, the strategy and the time saved — not in a unique "broker-only" rate (though some lenders do offer broker-exclusive products).

It is also worth noting that the rate you receive through a broker is the same rate available through that lender's direct channel — brokers cannot artificially increase your rate to inflate their commission under current ASIC remuneration rules.

Frequently Asked Questions

Do mortgage brokers cost money to use?
In almost all cases, no. Mortgage brokers in Australia are paid by the lender — not the borrower — through upfront and trail commissions. You receive the broker's advice, research and negotiation at no direct cost to you. The lender pays the broker from their margin on the loan.
What is an upfront commission for a mortgage broker?
An upfront commission is a one-time payment made by the lender to the broker when your loan settles. It is calculated as a percentage of the net loan amount and varies between lenders. It is fully disclosed to you in your broker's written documentation before settlement.
What is trail commission?
Trail commission is an ongoing annual payment from the lender to the broker, calculated as a small percentage of your outstanding loan balance. It compensates the broker for ongoing service and support across the life of the loan, and reduces as your loan balance decreases.
What happens if I repay or refinance my loan early — is there a clawback?
Yes. If you repay or refinance within the lender's clawback period (typically 12–24 months of settlement), the lender may recover some or all of the upfront commission from your broker. A good broker will discuss your holding period upfront and recommend the right loan regardless of clawback risk.
What is Best Interests Duty and how does it protect me?
Best Interests Duty (BID) is a legal obligation under the National Consumer Credit Protection Act requiring brokers to place your interests ahead of their own and those of lenders. Brokers must recommend a genuinely suitable loan, disclose all commissions and conflicts, and document why their recommendation is in your best interests.

Ready to Work With a Broker Who Puts You First?

At Integrated Finance Group, we believe transparency builds trust. We disclose all commissions upfront, operate across a broad lender panel, and recommend loans based on your situation — not our margin. If you would like to understand exactly how we would approach your loan and what we would earn from it, we are happy to have that conversation in our first free call.

☎ Call Brian — 0401 333 636 Book a Free Strategy Call

This article is general information only and does not constitute financial or credit advice. Individual circumstances vary — please seek advice specific to your situation. Credit provided by BLSSA Pty Ltd ABN 69 117 651 760, Australian Credit Licence 391237. Brian Hermosilla Credit Representative 485802, Frank Marin Credit Representative 486546. Member, Mortgage & Finance Association of Australia.