Explaining mortgage broker fees

Working with mortgage brokers offers you access to an array of home loan products and lenders. However, you may be wary of the fees your broker charges. This breakdown will tell you everything you need to know.

The first thing you need to know about mortgage broker fees is that most brokers don’t charge them so you usually won’t have to pay a penny. Some charge a fee for service, as detailed in their credit assistance quote. Instead, the broker earns a commission from the lender or credit provider for each loan they help secure. The size of this commission depends on several factors, which we detail further down.

How do mortgage broker commissions work?

Most mortgage brokers receive an upfront commission for their services. They also add the goods and services tax (GST) on top. Many also receive an ongoing or recurring commission, known as “trail” or “trailer” commission, for each loan they secure. These commission payments are made by the lender – not the customer. Lenders pay the upfront commission upon settlement of your home loan. They’ll then pay the trail commission for each year of the loan’s life. The amount of money your broker receives depends on two factors:

  • The size of the loan; and
  • The loan to value ratio (LVR). Your broker will receive a percentage based on these figures. These usually amount to the following rates:
  • Between 0.65% and 0.7% of the loan amount, plus GST, as upfront commission; and
  • Between 0.165% and 0.275% of the remaining loan amount, plus GST, per year as trail commission. Some lenders offer mortgage brokers a trail commission structure that sees the commission increase each year. For example, the broker may receive no trail commission during the first year of the loan, up to 0.165% in the second year, and so on during the lifespan of the home loan. Many lenders also take the strength of the borrower’s application into account when deciding on fees. They’ll offer bonus commission to brokers who have a history of delivering strong mortgage applications. These commissions rarely exceed 0.1% of the loan value. Even so, they encourage the broker to deliver strong applications. This may raise the issue of bias in your mind. (Just so you know: UNO has broken the link between the size of loans and choice of lender/ product and employee remuneration – it’s one of the many things that makes us different from traditional brokers.) The upfront and trail commission amounts that a broker expects to receive in relation to your home loan should be detailed in the Credit Proposal Disclosure Document.

What is trail commission?

Trail commissions are the broker’s reward for delivering a good borrower to the lender. Lenders prefer long-term loans and reliable borrowers. From the lender’s perspective, a good borrower makes repayments on time, ensuring the home loan doesn’t lose money for the lender. The borrower will also keep the same home loan, rather than refinance or look for other options later. Sometimes lenders will charge “clawback” fees to your broker if you stray from the original loan structures. We discuss this in greater detail below. If you default on your home loan repayments, the lender will not pay trail commission to your broker. Some stop their payments if your loan account stays in default status for more than 60 days. Others stop paying trail commission within a month of you defaulting on a payment.

How much should I pay a mortgage broker?

It depends on the mortgage broker, but often, absolutely nothing. As outlined above, lenders pay the upfront commission upon settlement of your home loan. Some brokers charge a fee for service, as detailed in their Credit Assistance Quote.

What percentage does a mortgage broker get paid?

Your broker will receive a percentage based on the size of the loan and the loan to value ratio (LVR). These usually amount to between 0.65% and 0.7% of the loan amount, plus GST, as upfront commission; and between 0.165% and 0.275% of the remaining loan amount, plus GST, per year as trail commission. The percentage your broker receives also depends on whether they go through an aggregator or not. If they go through an aggregator it will be dependent on the aggregator’s agreement with the lender and furthermore, the broker’s agreement with the aggregator. We explain more about aggregators further down.

Can a mortgage broker pay a referral fee?

Yes. A referral fee is often a percentage of the commission received by the broker and is paid to the referrer. For example, if a financial planner recommends their client see a particular broker, that broker would then pay the financial planner for the introduction and/or the client, depending on the agreement.

How much are solicitors’ fees for buying a house?

It depends but usually they will be somewhere around $1000 or $1500.

What is the average salary of a mortgage broker?

It is entirely dependent on how many loans they write. Most brokers rely on commission.

How much does the real estate agent make on a sale?

A real estate agent will make whatever their commission agreement is as a percentage of the sale price. It might be around 6 or 7% of the sale price.

What are the responsibilities of a mortgage broker?

The role of a mortgage broker is to recommend a product that is not unsuitable for the customer. Mortgage brokers also help customers apply for their home loan. According to a recent article published by Business Insider, more than half of new housing loans in Australia now originate through brokers, many of which are owned by major Australian banks such as the CBA, NAB and Macquarie. The mortgage broking industry has come under fire in recent years for aggressively pushing various deals. Last year, the High Court drew a hard line on brokers where it believed undue pressure had been applied to parents to “guarantee” their children’s property deal. The Australian Securities and Investments Commission (ASIC) regularly reviews the mortgage broking industry. At the request of the Government, in 2015, ASIC conducted a review of the mortgage broking market to determine the effect of current remuneration structures on the quality of consumer outcomes. The findings of that review, published in 2017, can be accessed here. This year, ASIC is conducting a shadow shopping exercise to consider whether “broker advice” results in “positive consumer outcomes” and “how consumer outcomes could be improved.”

What do aggregators do?

Aggregators are third parties that connect brokers with lenders. Many brokers use these broker groups to head their operations, help them lower the costs of business and for professional development training. A portion of the broker’s commission is usually passed onto the aggregator for these services. This fee can range from 0% to 50% of the broker’s commission. In return, your broker can use its aggregator’s position in the home loan industry to access better products. This can benefit you because it means you have more choice and access to special discounts.

What are “clawback” fees

Lenders want reliable borrowers who stay with the same home loan product for a long time. As a result, if you stray from the original loan structure you signed up for, a lender will charge “clawback” fees to your broker. Just as it sounds, this is the act of clawing back money. Lenders typically charge clawback fees to the broker if you refinance your home loan within the first two years, or if you pay it off completely in the same period. The clawback differs depending on the lender, but some take back all of the upfront commission if the loan ends within the first 12 months. This may drop to half if the mortgage ends in its second year. The bad news is that some mortgage brokers will ask you to pay this clawback fee. This should be detailed in the broker’s Credit Proposal Disclosure Document. It’s also wise to examine your contract for mentions of this fee before signing it. Happily, you can dispute your broker’s clawback fees if the contract you signed does not mention them. And, just so you know – UNO absolutely does not charge customers clawback fees. Those who want to pay their home loans quickly should look for the few lenders who don’t charge clawback fees. We can help you to do this, in addition to finding lenders who charge lower clawback fees than most. Also, keep in mind that it’s sometimes beneficial to pay a clawback fee if it means you gain access to a better home loan product. You should always speak to an adviser before doing this.

What other fees are involved?

Your mortgage broker may ask you to pay additional fees if:

  • You want to borrow less than $200,000
  • You have a difficult financial situation
  • Your loan is for business or commercial purposes
  • You want to refinance or repay the loan within 24 months Furthermore, some mortgage brokers operate using a direct fee structure. This involves you paying an upfront fee in return for receiving the commissions the broker would usually claim. However, such brokers are few and far between, as most find this structure is not financially viable. If the broker does charge any upfront fees for their service, these should be detailed in the a Credit Assistance Quote. At UNO, we don’t charge our customers any fees for our service – so we’d encourage you to get the process started with us so we can help you.

What is an Australian Credit Licence?

A mortgage broker must hold or be covered by an Australian Credit Licence (ACL). Furthermore, they must provide all of the protections that the National Consumer Credit Protection Act 2001 outlines. This prevents them from recommending unsuitable loan products that could damage your financial future. You’ll also find that most lenders compete for your business using their home loan packages. As a result, commission rates don’t vary too much between lenders. This ensures your broker isn’t motivated by the possibility of a higher commission with a particular lender.

What to do next

Now you know about the fees, it’s time to start looking for a mortgage broker. At UNO we don’t charge a fee for service when we help you find a loan. If you have more questions about broker fees, we’d be happy to help answer them.

  • Calculate how much you can borrow
  • Check out current interest rates
  • Discuss your options.This information is general in nature, and you should always seek professional advice when making financial decisions.This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. UNO can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender. Book a call in with UNO

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John Cahill
March 7, 2024
Scott Wilkinson was my broker last year when I sought finance for a new property investment and refinance for my property port folio. He was an absolute delight to work with. He was always professional, on time and always available to talk at a moment's notice to discuss my credit options and give well considered advice; usually this was very much after-hours due to my work commitments during the day. He was always happy to talk. I had not used a mortgage broker in a long time opting to do the re-financing myself. This was primarily due to disappointing experiences I'd had with mortgage brokers in the past. However with the increasing complex nature of dealing with credit providers, I could see that I needed a good advocate to act on my behalf for this particular refinance. In all honesty I did not hold much hope that in the current credit environment I would be able to secure the finance I required for the new property investment I was wishing to secure. Scott found a way however and was able to secure the finance along with the refinance of my portfolio. I have since referred friends to Scott and I know they have been very happy with his work. He is ideal for property investors who have busy day-jobs and need someone who understands property investment strategy and is able to tailor credit advice and options to their needs. Scott provides this advice and information in a way that is clear and concise. He kept me up to date continually during the application process. He made what could have been a very stressful and frustrating process easy and straightforward. I could not recommend Scott and the team at UNO Home Loans more highly. They are all a delight.
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Sally Mackenzie
February 19, 2024
We chose Uno Home Loans from their impressive web site knowing we were going to find it hard, on many fronts, to qualify for a home loan. We were incredibly fortunate to be assigned Mike Parsons as right from the get-go, despite the complexities, he hit the ground running for us. He was incredibly knowledgeable, with years of experience but what was immediately apparent and impressive was that he was totally invested in getting us over the line, doing absolutely everything possible, including working around the clock. Despite it being a relatively small loan in the order of things, Mike never missed a beat, getting docs ready, following up and answering every request from the proposed funder immediately. He kept us informed on progress the minute anything happened, and again if anything needed to be done, he was right on it. In short, we highly recommend Uno, and Mike, knowing what a remarkable job he did, over many weeks, to get us our loan. He got us a great deal, with far better rates than we expected, so we couldn't be happier. In fact, without doubt, you'd be hard pressed to find a more personable, sharp, hard working, dedicated professional who clearly prides himself on getting his customers standout results.
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Rod
February 13, 2024
Scott and his team were just A-mazing. We felt supported through the whole process with the greatest quality and care. Every question answered right in time, or even before we asked. The process was smooth and we got the best outcomes we could have wished for.
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Angela Biddle
February 6, 2024
Our mortgage recently came up for renewal, and with interest rates skyrocketing we were looking for ways to minimise the impact. Michael and his team were proactive and attentive. Michael spent time with us to understand our circumstances. He found mortgage options that worked with our current financial situation and longer investment plans. He presented clear options, providing guidance where needed. He and his team were helpful and responsive - streamlining the process and keeping us updated through the negotiations. In the end, Uno did the heavy lifting and secured a significantly better rate than our current bank offered, all with friendly, personal service. We would highly recommend UNO Home Loans.
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Fotis Bikas
January 15, 2024
I cannot help but congratulate Scott Wilkinson of UNO Home Loans for being an absolute credit to both his company and the entire loans industry. Scott is a truly rare gem of a broker in that he will not only go the extra mile to achieve for each customer the very best deal, but his knowledge of all and sundry within the industry is unsurpassed (you will see what I mean if you speak to him). Additionally, Scott has a clear passion for imparting his wealth of information with each customer, whereas the conversation with most other brokers would simply be over if they could not get you the best deal. For me, Scott Wilkinson of UNO Home Loans stands head and shoulders above the competition and I feel privileged to benefit both from his expertise and professionalism whenever it is time for a refinance or new loan.
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Tomoharu Matsui
January 11, 2024
Michael Parsons helped me a lot when it's difficult to establish my capabilities in loan.
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Gillian Kearon
January 9, 2024
I highly recommend Mike Parsons as a mortgage broker. I couldn't fault the service provided by UNO. Thanks Mike!
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Taner T
December 20, 2023
Thank you Eren Tan for the amazing service and support. Our Loan was a little tricky and complex for other lenders but Eren managed to get it over the line in record time. His professionalism and dedication to our needs was exceptional. If you need a Loan no matter how complex your situation, make sure you contact Eren at UNO Home Loans.
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Karaipu Brown
December 20, 2023
Buying & selling a house at the same time is very stressful but Scott Wilkinson from UNO home loans made sure we knew what was happening & took most of the stress away. He always kept us up to date and if we had a concern or wanted clarification on something we were able to call him, if he didn’t know the answer straight away he will find out and contact us back.. now we are enjoying our new house and turning it into a home :)
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Chris Anderson
December 18, 2023
Just completed my first loan with UNO which was so much easier than with other other brokers I have used in the past. Our broker MIKE PARSONS always had time for me and broke things down for me in the simplest of terms and was very patient with my silly questions and my constant changing of plans. I wish I had used them in the past as I wouldn't be in the situation I'm in now. Can't recommend them highly enough. Thanks UNO and Thanks MIKE 😊
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Stephen Broomfield
December 11, 2023
To be able to recommend Scott Wilkinson for your mortgage broker was a privilege. We had deals fall through but Scott supported, guided and stuck with us, proper partnership. The whole team at UNO helped us and supported us right through to after settlement. Made sure everything was correct and how we are progressing. Communication was amazing and straightforward and easy to understand. Transparent. We can not Recommend Scott and the team as Uno high enough. Use UNO with confidence.
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Tarek Hussain
December 6, 2023
Can't thank Amy enough for her hard work, dedication and determination on getting multiple loans completed for me. I wouldn't hesitate in recommending Amy and the Uno team to any of my associates. Will definitely be back in the near future!
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