Does a mortgage broker cost money?

What to ask before proceeding

Ask how the broker is paid, whether remuneration differs by lender and whether you could owe any engagement, application or clawback-related fee. Also ask which lenders the broker can and cannot access.

• Request written details of commissions and client fees.
• Understand what service the fee covers.
• Compare recommended loans by total cost and features.
• Check the broker's Australian credit licence details.

Commission does not replace comparison

Mortgage brokers must act in a consumer's best interests when providing credit assistance. You should still ask why a recommendation is suitable and request more than one option, including a low-cost comparison where appropriate.

How lender commission usually works

A lender commonly pays an upfront commission after settlement and an ongoing trail commission while the eligible loan remains in place. The amount and method must be disclosed in the broker's credit proposal or related documents. Commission rates can vary, but the broker's recommendation must still be in the consumer's best interests. Ask how many lenders are on the broker's panel and whether the recommended options represent the suitable market available through that panel.

When a client fee may apply

A broker may charge directly for complex work, small loans, commercial finance or when a loan is repaid very soon after settlement and commission is clawed back. Practices differ. Any client fee, trigger and refund or clawback arrangement should be explained before you proceed and recorded in writing. Do not assume a fee is unreasonable or standard without comparing the service. The key question is whether you understand the cost and the work being provided.

What value to expect

A broker should clarify your objectives, assess borrowing capacity, compare suitable options, explain costs and risks, prepare the application and manage it through approval and settlement. Good service also includes clear communication about conditions and realistic time frames. The cheapest loan is not always suitable, but higher cost needs a reason. Ask why each recommended product fits, what alternatives were considered and what circumstances would make the recommendation no longer appropriate.

Questions to ask before you proceed

• What are the interest rate, comparison rate, ongoing fees and total expected cost?
• How do the offset, redraw, extra-repayment and loan-split rules work in practice?
• What would the repayment become if rates rose or the selected feature changed?

Official guidance: Moneysmart: Using a mortgage broker

This is general information, not personal financial, tax or legal advice. Lending criteria, fees and eligibility vary.

Related questions

• Fixed vs variable home loans: which is better?
• Offset account vs redraw: what's the difference?
• Should I make extra repayments or keep money in an offset account?