Mortgage broker: what they do, what they cost and how to choose one

What does a mortgage broker do?

A mortgage broker compares home loans from a panel of lenders, recommends one that suits your situation, and handles the application from the first conversation through to settlement. Rather than working for a single bank, a broker has access to a panel of lenders, often 50 or more, including major banks, credit unions, building societies and specialist non-bank lenders.

Their role is to assess your financial situation, understand your goals, and recommend the home loan that best suits your needs from across that panel. A good mortgage broker does far more than find a low interest rate: they weigh loan features, lender policies, approval timeframes and your long-term plans to recommend the right overall structure. In Australia, mortgage brokers now arrange over 70% of all residential home loans.

The mortgage broker handles the entire application process. This includes collecting your financial documents, preparing and packaging your application, submitting it to the chosen lender, liaising with the lender's credit team, coordinating with solicitors and conveyancers, and making sure settlement proceeds smoothly. For most borrowers, working with a broker significantly reduces the time and stress involved in securing a home loan.

How do mortgage brokers compare lenders?

One of the most valuable services a mortgage broker provides is a structured comparison of lenders that goes well beyond the headline rate. Brokers use professional software and aggregator tools to compare products side by side, looking at:

• the advertised rate, the comparison rate (which includes standard fees), and upfront and ongoing fees
• features: offset accounts, redraw, extra repayments, fixed rate break costs and portability
• approval timeframes and how each lender values property
• credit policy: how each lender treats overtime, rental income, HECS debt, credit card limits and self-employed income

This depth of analysis is something individual borrowers rarely have the tools or knowledge to perform themselves. A broker's experience across hundreds of applications gives them insight into which lenders are performing well on approval turnaround, valuation accuracy and service, factors that are invisible from outside but matter during a time-sensitive property purchase.

What is a mortgage broker?

A mortgage broker is a licensed intermediary who arranges home loans from more than one lender and is not the lender on most of the loans they arrange. That is close to the legal definition: under section 15B of the National Credit Act, summarised in ASIC's Regulatory Guide 273, a mortgage broker carries on a business of providing credit assistance for loans secured over residential property, offered by more than one credit provider. People also call them home loan brokers or mortgage advisers.

A licensed mortgage broker holds an Australian Credit Licence or is a credit representative of a licensee. ASIC's Regulatory Guide 206 expects anyone arranging home loans from other lenders to hold at least a Certificate IV in Finance and Mortgage Broking and to complete at least 20 hours of professional development a year, and the MFAA requires its members to hold the Diploma of Finance and Mortgage Broking Management or complete it within 12 months of joining.

A mortgage broker is a specialist kind of finance broker. If you also need a car loan, business loan or equipment finance, the finance broker guide explains who arranges what and which rules apply to each.

Should I use a mortgage broker?

Use a mortgage broker if any of the following apply: you are a first home buyer, you are self-employed or have irregular income, you have a default or thin credit file, you own investment properties, you are refinancing more than one loan, or you simply do not have the hours to compare thirty lenders' policies yourself. In each of those cases the broker's knowledge of which lender will approve you, and on what terms, is worth more than any rate difference.

You may not need one if you are a PAYG borrower with a clean file, a 20% deposit, an existing bank that has already offered you a genuinely competitive rate, and you have checked that rate against the market. Some direct-only lenders, including a few neobanks, are not on broker panels, so if one of those is your first choice you will apply direct regardless.

The honest test is this: get a written offer from your own bank, then ask a broker what their panel would do. Because the broker's service is free and there is no credit enquiry until you choose to apply, the comparison costs you nothing. Around 70% of Australian home loans now settle through brokers, which says most borrowers find the comparison worth having. The mortgage broker vs bank guide sets the two routes side by side.

How much does a mortgage broker cost?

Nothing, in almost every case. Mortgage brokers in Australia are paid by the lender, not by the borrower, so the service is free to you and the rate you receive is the same as, or often better than, walking into a branch. A small number of brokers charge a fee for very complex or low-value loans; if one does, they must disclose it in writing before you proceed, and you should ask why. The mortgage broker fees guide covers the exceptions and the written quote rule.

One of the most common questions borrowers ask is how a mortgage broker can offer a free service. The answer lies in the business model: lenders pay brokers a commission when a loan is settled because brokers bring them qualified borrowers. This distribution cost is built into the lender's business model, the same way advertising and branch costs are, and does not result in a higher rate for broker-originated loans.

In fact, some lenders offer marginally better rates through the broker channel because the cost of acquiring a customer through a broker is lower than maintaining a branch network. The ACCC's Home Loan Price Inquiry confirmed that broker customers generally receive equivalent or better pricing compared to those who approach lenders directly. This makes using a mortgage broker a genuinely no-cost proposition for Australian borrowers: you gain access to expert advice, a wide lender panel and full application management without paying a cent from your own pocket.

How do mortgage brokers get paid?

Understanding how mortgage brokers earn their income is important for transparency and trust. Mortgage brokers in Australia are paid by the lender, not by the borrower. There are two components to broker remuneration: an upfront commission and an ongoing trail commission.

The upfront commission is paid when your loan settles and is typically between 0.5% and 0.7% of the loan amount (including GST). For example, on a $500,000 loan, the upfront commission would be approximately $2,500 to $3,500. This commission compensates the broker for the work involved in comparing lenders, preparing your application, and managing the approval process.

The trail commission is an ongoing payment made monthly by the lender to the broker for the life of the loan. Trail commission is typically around 0.15% to 0.20% per annum of the outstanding loan balance. This ongoing payment incentivises brokers to provide continued service after settlement, including annual rate reviews, refinance assessments, and ongoing support with your lending needs.

Critically, these commissions are paid by the lender from their own margin and do not increase the interest rate or fees you pay. The rate you receive through a broker is the same as, or often better than, the rate you would receive by walking into a bank branch directly. The mortgage broker commission guide lists what each major lender pays, with the MFAA's worked example.

What is the downside of using a mortgage broker?

There are three, and none of them is the cost. First, a broker can only recommend lenders on their panel. Most panels cover the major banks, the mutuals and the main non-bank lenders, but a handful of direct-only lenders are missing, so a broker's "best rate" is the best rate on that panel. Ask how many lenders are on it.

Second, brokers are paid on settlement, and trail commission is paid for as long as the loan stays with that lender. Best Interests Duty and the ban on conflicted remuneration mean a broker cannot steer you to a higher-paying lender, but the incentive to settle a loan rather than tell you to wait still exists. A good broker will tell you to stay put when that is the right answer.

Third, quality varies. The licence is the floor, not the ceiling. A broker who writes a hundred loans a year has seen your situation before; one who writes ten may not have. The questions further down are how you tell the difference in the first meeting.

Do I need a mortgage broker, or should I go straight to the bank?

Choosing between a mortgage broker and going directly to a bank is one of the first decisions borrowers face. Both options have advantages, and understanding the differences helps you make an informed choice.

A mortgage broker offers access to a wide range of lenders, meaning they can compare dozens of products to find the one best suited to your circumstances. This is particularly valuable if you have a complex financial situation, such as being self-employed, having multiple income sources, holding existing investment properties, or having a less-than-perfect credit history. Different lenders have different credit policies, and a broker knows which lender is most likely to approve your application and offer the best terms.

Going directly to a bank can be simpler if you already have a strong banking relationship and are confident you are getting a competitive rate. However, a bank can only offer you their own products. They cannot tell you whether a competitor is offering a better rate, more suitable features, or a higher borrowing capacity for your specific situation. Banks also do not have a legal obligation to act in your best interests, while brokers do, under the Best Interest Duty.

The main advantages of using a broker include: access to 50+ lenders from one point of contact, free service at no cost to you, time savings (one application covers multiple lenders), expert knowledge of lender policies and credit appetites, negotiation leverage with lenders, and ongoing support including annual rate reviews. The primary consideration is that some lenders, such as certain neobanks, may not be on a broker's panel, though the vast majority of Australian lenders distribute through the broker channel.

What is Best Interests Duty?

Since 1 January 2021, Australian mortgage brokers have been subject to a Best Interest Duty under the NCCP Act. This landmark reform requires brokers to act in the best interests of their clients when providing credit assistance. The duty has three core components.

• The best interests obligation. The broker must act in your best interests in relation to the credit assistance they provide, which means recommending the loan that genuinely suits your needs, not the one that pays the highest commission.
• The conflict priority rule. Where a conflict of interest arises, the broker must give priority to your interests.
• No conflicted remuneration. A broker must not receive any payment or benefit that could reasonably be expected to influence their recommendation.

The Best Interest Duty is a significant consumer protection that distinguishes mortgage brokers from bank employees. Bank staff are not subject to this duty; they are incentivised to sell their employer's products. The fees and best interests duty guide explains what the duty obliges a broker to do on your file.

How do I choose a mortgage broker?

Not all mortgage brokers are the same, and choosing the right one can make a significant difference to your experience and outcome. Here are the key factors to consider when selecting a mortgage broker in Australia.

Check the licence

All mortgage brokers in Australia must hold an Australian Credit Licence or be an authorised credit representative of a licence holder, as required by the National Consumer Credit Protection Act 2009 (NCCP Act). Moneysmart's advice is to check before you meet: search the Credit Licensee or Credit Representative list on ASIC's professional registers by name or number. Membership of an industry body such as the Mortgage and Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA) is also a positive indicator of professionalism and ongoing education.

Ask about the lender panel

A broker with access to 30+ lenders can offer you a genuinely competitive comparison. Ask which lenders are on their panel and whether they include both major banks and specialist non-bank lenders. Some brokers have limited panels or are tied to specific aggregation groups, which can restrict the options available to you.

Look at reputation and experience

Online reviews, referrals from friends or family, and industry awards can provide insight into the quality of service a broker provides. Pay attention to reviews that mention communication, responsiveness, and the broker's willingness to explain the process clearly, and ask how many loans like yours they have written.

Questions to ask a mortgage broker

When meeting with a mortgage broker for the first time, asking the right questions helps you assess their suitability and ensure you are in good hands. Here are the most important questions to ask.

A good broker will answer these questions openly and without hesitation, and should show you more than one loan option. If a broker is evasive about their commission structure or the size of their lender panel, consider looking elsewhere.

How does the process work with a broker?

The mortgage application process can seem daunting, but a good mortgage broker simplifies it considerably. Understanding the stages helps you prepare and know what to expect at each point.

The process begins with an initial consultation where your broker gathers information about your financial position, goals, and preferences. They will review your income, expenses, assets, liabilities, and credit history. Based on this assessment, they will recommend suitable lenders and products, explaining the interest rate, features, fees, and total cost of each option.

Once you choose a product, your broker prepares and submits a formal application to the lender. The lender then conducts their own credit assessment, verifies your documents, and orders a property valuation if applicable. During this period your broker is your point of contact: they follow up with the lender, address any queries, and keep you informed of progress.

Upon approval, the lender issues a formal offer, which you review and sign. Your broker coordinates with solicitors, conveyancers, and the lender to arrange settlement.

How are mortgage brokers regulated?

Mortgage brokers in Australia operate within a robust regulatory framework designed to protect consumers. The primary legislation governing mortgage brokers is the National Consumer Credit Protection Act 2009 (NCCP Act), which is administered by the Australian Securities and Investments Commission (ASIC).

Under the NCCP Act, all mortgage brokers must either hold an Australian Credit Licence or be authorised as a Credit Representative of a licence holder. To obtain and maintain a licence, brokers must meet minimum education requirements (at least a Certificate IV in Finance and Mortgage Broking), complete at least 20 hours of Continuing Professional Development (CPD) a year, hold professional indemnity insurance, be a member of the Australian Financial Complaints Authority (AFCA), and comply with responsible lending obligations.

Responsible lending obligations require brokers to make reasonable inquiries about a borrower's financial situation, take reasonable steps to verify the information provided, and make a preliminary assessment that the credit product is not unsuitable for the borrower. These obligations ensure that borrowers are not placed in loans they cannot afford and that the lending process is conducted with integrity and professionalism.