What Does a Mortgage Broker Actually Do?

If you have never used a mortgage broker, you probably have one of two mental models. Either they are a middleman who adds a step to the process, or they are a salesperson who is trying to push you into a particular loan. Both are wrong.

A mortgage broker's job is to find you the right loan from across the market. Not from one bank. Not from whichever lender is offering the best incentive this month. From the full range of lenders available through their panel — which, for most brokers, is upwards of 30 to 50 institutions.

That might sound like a marketing line, but the way brokers are paid actually makes it structurally true. Let me explain.

How Do Mortgage Brokers Get Paid?

This is the part most people do not understand, and it is the key to understanding why brokers do what they do.

Mortgage brokers in Australia are paid by the lender, not by you. There are two components to their compensation:

Upfront commission. When your loan settles, the lender pays the broker a one-off commission. This is typically a percentage of the loan amount. It is the same regardless of which lender or product the broker places you with — the commission rates across lenders are broadly comparable, so there is no meaningful financial incentive for a broker to steer you toward one lender over another based on the upfront payment.

Trail commission. This is the part that matters most. For as long as your loan remains on the broker's book, the lender pays the broker a small ongoing commission — a fraction of a percent of the outstanding loan balance, paid monthly.

Trail commission is what separates good broking businesses from great ones. It is the recurring revenue that makes a broker's business sustainable over the long term, and it is directly tied to keeping you happy and on their book.

Why Does the Trail Commission Structure Work in Your Favour?

Think about what trail commission actually incentivises.

If a broker places you in a loan and forgets about you, one of two things happens. Either you stay in that loan even as better options emerge, get frustrated, and eventually leave — taking the trail with you. Or another broker approaches you with a better deal, refinances you out, and the original broker loses the trail.

Either way, the broker who is not looking after you loses.

A broker who actively monitors your loan and the market is incentivised to come back to you when a better rate is available. If they refinance you to a different lender, they earn a new upfront commission and retain you as a client. If they negotiate a better rate with your current lender, they keep the trail. Both outcomes work for you.

This is not altruism. It is a business model that aligns the broker's interests with yours. They make more money over time by keeping you in the best possible position than by placing you and walking away.

What Does a Broker Actually Do, Step by Step?

1. Assesses Your Situation

Before anything else, your broker needs to understand your financial position. This means your income (including how it is structured), your expenses, your existing debts, your savings, and what you are trying to achieve — whether that is buying a first home, upgrading, investing, or refinancing.

This initial assessment does not affect your credit score. It is a conversation and a data-gathering exercise that gives the broker enough information to determine your borrowing power across multiple lenders.

2. Identifies Your Options

This is where the broker adds the most value. Every lender has different criteria, different rates, different features, and different ways of calculating what you can borrow. A broker runs your profile against these criteria and identifies which lenders are the best fit for your specific situation.

This is not just about finding the lowest rate. Rate matters, but so do loan features (offset accounts, redraw facilities, repayment flexibility), approval timeframes, credit policy (especially if your situation is not straightforward), and the total cost of the loan including fees — which is reflected in the comparison rate.

3. Recommends a Shortlist

Your broker presents you with a shortlist of suitable options and explains the trade-offs. This is where the Best Interests Duty — a legal obligation introduced in 2021 — comes in. Brokers are required by law to act in your best interests, not the interests of the lender. They must be able to demonstrate why the loan they recommend is suitable for you.

4. Manages the Application

Once you choose a loan, your broker handles the application process with the lender. They compile your documentation, submit the application, manage any queries from the lender's credit team, coordinate the property valuation, and keep you informed at every stage.

This is not trivial. A complex application can involve dozens of documents, multiple rounds of back-and-forth with the lender, and weeks of processing. Having a broker manage this — someone who knows what each lender's credit team is looking for and how to present your application — makes a material difference to the speed and outcome of the process.

5. Supports You After Settlement

This is the trail commission part in action. A good broker does not disappear after your loan settles. They monitor your loan relative to the market and reach out when there is an opportunity to save you money — whether that is refinancing to a different lender, renegotiating your rate with your current lender, or restructuring your loan as your circumstances change.

Should I Use a Mortgage Broker or Go Directly to a Bank?

The alternative to using a broker is going directly to a bank. There is nothing wrong with this, but it is worth understanding what you give up.

When you walk into a bank, the person you speak to can only offer you that bank's products. They might have a dozen home loan options, but they are all from the same institution. They cannot tell you that a different lender would give you $50,000 more in borrowing power, or that another lender offers a better rate for your specific situation.

A broker sees across the market. They can compare products from dozens of lenders and identify options you would never find on your own — particularly from smaller lenders and non-bank lenders that do not have branches or national advertising but often have highly competitive products.

The other difference is ongoing service. A bank relationship manager may look after your account, but they are not financially incentivised to tell you that a competitor has a better deal. A broker is.

How Do I Choose a Mortgage Broker?

Not all brokers are the same. Here are a few things to consider:

Panel size. A broker with access to 30 or more lenders gives you a broader view of the market than one with a small panel. Ask how many lenders they work with.

Communication style. You want a broker who explains things clearly and keeps you informed throughout the process. The first conversation should tell you a lot about how they communicate.

Ongoing service. Ask what happens after settlement. A good broker will proactively review your loan and let you know when a better option is available. This is the trail commission incentive at work — ask about it directly.

Qualifications and licensing. All mortgage brokers in Australia must hold an Australian Credit Licence (or be an authorised credit representative). You can verify this through ASIC's Professional Registers.

What Is the Best Interests Duty?

Since January 2021, mortgage brokers in Australia have been legally required to act in the best interests of their clients. This is not a guideline — it is a statutory obligation under the National Consumer Credit Protection Act.

In practice, this means your broker must:

• Prioritise your interests ahead of their own and ahead of the lender's interests.
• Consider a range of products from across their panel that could meet your needs.
• Be able to explain why the product they recommend is suitable for you.
• Not recommend a product that is unsuitable, even if you ask for it.

This is a stronger obligation than what applies to bank staff. A bank employee is not required to act in your best interests — they are required to ensure the product is "not unsuitable," which is a lower bar.

Common Misconceptions About Mortgage Brokers

"Brokers are more expensive." No. Brokers are paid by the lender, not by you. Using a broker does not add to your cost.

"Brokers only push certain lenders." The upfront commission rates across lenders are broadly similar. There is no meaningful financial incentive to push one lender over another. And the Best Interests Duty makes it a legal requirement to recommend what is right for you.

"I can get a better deal going direct." Sometimes banks offer exclusive products that are not available through brokers. But brokers have access to products from dozens of lenders, and they can often negotiate rate discounts that match or beat what you would get walking into a branch.

"Brokers are just for people with complicated situations." Brokers add value at every level. Even if your situation is straightforward, a broker will compare options you would not find on your own and manage the application process for you. If your situation is complex — self-employed, multiple income streams, previous credit issues — a broker is even more valuable because they know which lenders are likely to approve you.

What to Do Next

If you are thinking about buying, refinancing, or just want to understand your options, get a free assessment from Mage. We will run your numbers across the market, explain your options in plain language, and give you a clear picture of where you stand — without any impact on your credit score.

Get your free assessment →

Frequently Asked Questions

Do mortgage brokers charge a fee in Australia?

No. Mortgage brokers in Australia are paid by the lender through upfront and trail commissions. You do not pay anything to use a broker. The comparison rate on any loan already accounts for broker commissions.

How much commission does a mortgage broker earn?

Brokers typically earn an upfront commission of around 0.5% to 0.7% of the loan amount when your loan settles, plus a trail commission of approximately 0.15% to 0.20% of the outstanding loan balance paid annually for as long as you hold the loan.

Are mortgage brokers required to act in my best interests?

Yes. Since January 2021, the Best Interests Duty requires all mortgage brokers in Australia to prioritise your interests ahead of their own and the lender’s. This is a statutory obligation under the National Consumer Credit Protection Act.

Can a mortgage broker get me a better deal than going to a bank directly?

In most cases, yes. A broker compares products from 30 to 50 or more lenders and can identify options, including from non-bank lenders, that you would not find on your own. They can also negotiate rate discounts and find lenders whose credit policies suit your specific situation.

What is the difference between a mortgage broker and a bank lender?

A bank lender can only offer products from their own institution. A mortgage broker is independent and compares home loans from dozens of lenders to find the best fit for your situation. Brokers are also legally required to act in your best interests, which is a higher obligation than what applies to bank staff.