A mortgage broker is a credit licence holder or representative who helps you compare and apply for home loans from lenders they can access. The broker arranges the loan but does not lend the money.
In Australia, a mortgage broker must act in your best interests when suggesting a loan. Lenders usually pay the broker’s commission. A broker can charge you a fee only after giving you a written quote that you sign and providing the agreed services.
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What a mortgage broker does
A broker collects information about your finances and goals, compares loans from the lenders they can access and helps manage the application. For background on broker business models, read our guide to the best mortgage broker aggregators. Ask who will manage each stage of the mortgage application process, including documents, lodgement and lender follow-up.
A bank loan writer usually offers that bank’s products. A broker can compare available lenders, but may not have access to all lenders or loans. Ask how many lenders the broker uses instead of assuming they compare the whole market.
How brokers work day to day
You do not need to choose the mortgage broker software used inside the business. Ask the broker to show the loans compared and explain why the recommendation is in your best interests.
Ask which aggregator the broker uses and how many lenders are available through that arrangement. ASIC recommends asking how many lenders the broker uses and whether they receive a higher payment from particular lenders.
What a broker can and cannot promise
A broker can help with the loan application and manage the process through to settlement. The useful question is which available lenders fit your circumstances and why each option made the shortlist.
Do not treat a promise of lower interest rates as proof that one broker has the best loan. Compare the rate, fees and features in the actual options and ask the broker to explain the recommendation.
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How mortgage brokers are paid
Lenders usually pay commissions when a loan settles. ASIC says a broker who charges you directly must give a written quote and obtain your signature before they can ask you to pay.
ASIC describes lender payments as upfront and ongoing commission. Our guides cover mortgage broker fees, upfront commissions and trial commissions. Ask how the shortlisted lenders pay the broker and whether one pays more than another.
When a broker charges no direct fee, lender commission can still affect how they are paid. Ask the broker to show the comparison and explain any differences in commission between the shortlisted lenders.
The broker’s mortgage broker software does not change your decision. Keep the signed fee quote and your notes about the loans compared, the recommended option and the broker’s explanation.
Checks before you appoint a broker
- Search ASIC’s professional registers for a credit licence or credit representative number that matches the person you are meeting.
- Ask which aggregator they use and which lenders they cannot access.
- Ask how they are paid, including any fee you would be quoted.
- Ask them to explain two loan options and why the preferred one is in your best interests.
Meet more than one broker if the first conversation is vague about lenders or pay. The same file can produce different shortlists.
Technology and the housing market
Whether the broker uses comparison software or an aggregator portal, ask to see the loans considered. The broker must explain why the recommended loan is in your best interests.
A broker gives borrowers another way to compare lenders in Australia’s housing market. The usable options still depend on the broker’s panel and the borrower’s circumstances.
What to do next
If you want a broker, complete the ASIC register check, then run the four questions above in the first meeting. Keep the signed fee quote and the details of the recommended loan.
