How Do Mortgage Broker Commission Rates Work?

Mortgage brokers don’t charge you directly (aside from a few cases).

Instead, lenders pay them an upfront commission and a smaller ongoing “trail” commission for managing your loan over time.

These commissions are based on your loan amount, LVR, and how long you keep the loan. Trail commissions also fund your ongoing support such as rate reviews, refinancing help, and post-settlement service.

Do You Need To Pay Broker Fees?

Mortgage brokers don’t charge customers as lenders pay them commissions instead.

Aside from the upfront commission that brokers earn when your loan settles, they also get a trail commission during the lifespan of the loan.

You’ll only pay a broker fee in rare situations or when the loan amount is very small.

Mortgage brokers generally operate as small businesses and earn income through lender-paid commissions. These commissions vary depending on:

• Loan amount

• Loan-to-Value Ratio (LVR)

• Loan performance over time

And since lenders tend to cover these commissions, most borrowers never pay out of pocket.

How Do Mortgage Broker Commission Rates Work?

Brokers receive two payments from lenders after settlement: an upfront commission based on the loan size, and a smaller trail commission paid monthly or yearly while the loan remains active.

The exact percentages differ between lenders but follow industry-standard ranges.

Industry Standard Commission Ranges

• A $600,000 loan at 0.7% upfront = $4,200 (+GST).

• Trail at 0.2% on a $580,000 balance = ~$96 per month.

What Is A Trail Commission And Why Do Lenders Pay It?

Trail commission is a small ongoing payment a broker receives for managing your loan relationship. It continues as long as the loan remains with the lender and isn’t in arrears.

Trail ends if you refinance, pay off the loan, or fall behind on repayments.

Some lenders scale trail payments over time:

• Year 1: 0%

• Year 2: 0.165%

• Year 3: 0.22%

• Year 4: 0.275%

• Year 5: 0.33%

• Year 6+: 0.385%

This rewards brokers for long-term, high-quality loans, and not quick churn.

Did The Royal Commission Change Mortgage Broker Commissions?

The Royal Commission recommended borrowers pay brokers and trail commissions be removed, but the government kept the current structure.

Reviews found no evidence of systemic misconduct, so lender-paid commissions remain in place for both new and existing loans.

Key recommendations

• Borrowers (not lenders) should pay brokers

• Existing trail commissions remain untouched

• Trail for new loans to end after 18 months

• Upfront commissions to end later

Outcome

The government did not implement these changes. Current remuneration remains compliant and regulated under Best Interests Duty (BID).

How Does The Trail Commission Benefit You As A Borrower?

Trail commission gives brokers a financial reason to look after you long term.

Since their trail commissions are tied to your loan performing well, brokers are incentivised to monitor your rate and help you refinance when needed, and support you through future lending decisions.

Your broker can continue assisting you with:

• Annual rate reviews and renegotiations

• Refinancing guidance if a better rate becomes available

• Loan feature support, like offset account optimisation

• Annual property valuations

• Construction loan progress payment management

• Debt consolidation assessments

These services are rarely provided by direct banks.

Why Do Brokers Get Trail Cut If A Loan Is In Arrears?

Lenders stop paying trail if your loan goes into arrears because trail is intended for well-performing loans.

Depending on the lender, trail stops after 15, 30, or 60 days of missed payments. This encourages brokers to recommend loans suited to your budget and stability.

This system rewards brokers who set borrowers up for success, not stress.

How Do Aggregators Fit Into Mortgage Broker Commissions?

Aggregators are broker networks that provide software, compliance support, training, and lender access. They receive commissions from lenders, take a small cut, and pass the rest to the broker. Their slice typically ranges from 5% to 50%, depending on the agreement.

Why Do Aggregators Exist?

Aggregators provide:

• Compliance and licensing support

• Software and CRM systems

• Commission distribution

• Negotiation power with lender

• Professional development

This collective bargaining often results in better rates or policies for borrowers.

Will You Ever Need To Pay A Mortgage Broker Directly?

Most borrowers would never have to pay a broker because lenders cover the cost. However, brokers may charge a fee for complex scenarios, very small loans, commercial loans, business loans, or loans refinanced or paid out within two years.

Typical fee-triggering situations

• Loans under $300,000

• Complex income (e.g., self-employed with irregular history)

• Commercial or business lending

• Early discharge/refinance within two years

You can find out more information on the ‘Our Fees‘ page.

Do Brokers Receive Bonus Commissions From Lenders?

Yes. Some lenders pay bonus commissions to aggregators based on application quality and conversion rates. High-quality, error-free submissions are rewarded, and these bonuses are usually shared with brokers after the aggregator’s cut.

Bonus structure examples

Submission quality (no errors):

• <80%: No bonus

• 80%–90%: 0.0275%

• ≥90%: 0.055%

Conversion rate (settled loans):

• <75%: No bonus

• 75%–80%: 0.055%

• ≥80%: 0.11%

This encourages brokers to submit clean, accurate, fully assessed applications.

What About “No-Commission” Mortgage Brokers?

Some mortgage brokers refund all commissions and charge you a fee instead, but most of these models have failed. Compliance and processing costs are high, and refunding commissions leaves little profit, making the structure financially unsustainable long term.

Why these models struggle

• Compliance costs are rising

• Software and CRM licences are expensive

• Staffing and admin are unavoidable

• Commission refunds erode already thin margins

Need help with your home loan?

Mortgage brokers are typically free for most borrowers, and you get expert support from pre-approval to settlement and beyond.

Call us on 1300 889 743 or complete the free assessment form to get personalised help.