What does a mortgage broker do, and how are they paid?

A broker starts by understanding your income, expenses, deposit and goals. They work out roughly what you can borrow, shortlist suitable loans, explain the differences and help you choose. They then prepare the application, deal with the lender and coordinate settlement with your conveyancer.

The value is choice and know-how. Each lender assesses income, deposits and property types differently. A broker who knows those policies can send your application to a lender likely to approve it, rather than you applying to several and collecting credit enquiries along the way.

Most brokers are paid by the lender, not by you. Usually that is an upfront commission when the loan settles plus a smaller ongoing (trail) commission while the loan is active. The rate you are offered is generally the same as going to the lender directly.

Your broker must tell you how they are paid before you proceed, including the commission they expect to receive. If any fee applies to you, it must be disclosed upfront.

Yes. Since 1 January 2021, mortgage brokers in Australia have had a legal duty to act in the best interests of their clients, and to resolve any conflict between their own interests and yours in your favour. Brokers must also be licensed, or authorised under a licence, and belong to the Australian Financial Complaints Authority (AFCA).

A broker can help anyone, but is especially useful when:

• You are a first home buyer and want the process and schemes explained
• You are self-employed or have income that varies
• You have a small deposit and want to compare LMI, schemes and guarantor options
• You have not reviewed your rate in a while and want to know if you are paying too much
• Your bank has said no, or you want to compare without multiple applications