Most Australian mortgage brokers get paid by lenders through their aggregator, with upfront commission after settlement and trail commission while the loan remains eligible.
Some brokers also charge the client a fee under a written agreement. That fee is separate from lender commission. In most cases, the borrower pays the broker nothing directly, according to the Mortgage & Finance Association of Australia (MFAA). The broker’s commission disclosure must state what they expect to receive and identify any proposed client fee.
How Lender Commission Works
The lender pays commission to the aggregator, which passes the broker’s share to their nominated bank account under the aggregator agreement. Aggregator fees or deductions affect the amount the broker keeps.
The aggregator pays against a commission statement, usually accompanied by a recipient-created tax invoice (RCTI). Read the RCTI and commission statement guide to understand the payment record.
For example, Connective’s published member agreement provides for electronic commission statements and RCTIs when it pays commission. A recipient-created tax invoice is issued by the recipient of the broker’s services under the applicable tax-invoice arrangement.
Upfront Commission
Upfront commission is a payment for a loan that settles. Loan approval alone does not trigger it. The payment reaches the broker after the lender pays the aggregator and the aggregator processes its payment run.
Trail Commission
Trail commission is an ongoing payment while the loan remains eligible under the lender’s rules. The lender commonly calculates trail on the eligible loan balance and pays it monthly. Repayments, discharge or a change in eligibility can reduce or stop it.
Settlement and Clawback
Lender commission generally depends on settlement, when the loan funds are advanced. The lender can recover some or all of the upfront commission if the loan is discharged or changed within its clawback period.
The aggregator passes that commission clawback to the broker under their agreement. It can be deducted from later commission payments or collected as a repayment.
For example, a borrower who refinances during the lender’s clawback period can trigger repayment of upfront commission and stop trail on the old loan. The amount recovered depends on the lender’s terms.
The broker must act in the client’s best interests. A broker must not steer a client away from a suitable refinance or other change to protect commission.
What Can Change the Payment?
The loan type and balance affect commission, along with the lender’s schedule and the broker’s aggregator agreement. There is no universal mortgage broker commission rate. The Australian mortgage broker commission rates guide covers the rates separately.
Loan features must be assessed for the client, including the interest rate and whether an offset account meets their needs. The effect on broker pay must not decide which loan the broker recommends.
For a client fee, the broker must provide a written quote that the client signs before services begin. The fee becomes payable after the broker provides the agreed services. Read about fees brokers charge clients for that separate payment arrangement.
