Is a Mortgage Broker Really Free? Here's Exactly How We Get Paid
Upfront and trail commissions, conflicts of interest, and the questions worth asking any broker — nothing left out.
Amit Kumar Basnet
Director & Lending Specialist
- When your loan settles, the lender pays the broker a commission. That's the entire business model.
- Commissions come out of the lender's operating margin — they are never added to your loan or deducted from your repayments.
- Lenders do not have a separate 'broker rate' — broker customers draw from the same or sharper pricing due to negotiated discounts.
- The legal Best Interests Duty obligates Australian mortgage brokers to recommend the optimal loan for you, regardless of commission rates.
- Before signing, your broker must provide full written disclosure detailing the exact commission earned.
The short version
When your loan settles, the lender pays the broker a commission. That's it. That's the business model. You get whole-of-market comparison, application handling and negotiation; the lender pays for the introduction because it's cheaper for them than running more branches and call centres.
The longer version: two kinds of commission
Broker commissions in Australia come in two parts:
Both come out of the lender's margin — not added to your loan, not deducted from your account.
- Upfront commission — a one-off percentage of the loan amount, paid by the lender shortly after settlement.
- Trail commission — a much smaller ongoing percentage, paid while the loan stays healthy. Trail is why good brokers keep looking after you for years: it aligns our income with your loan actually working out.
"So doesn't the lender just charge me more to cover it?"
No — and this is the part most people find surprising. Lenders don't have a separate, more expensive 'broker rate.' Branch customers and broker customers draw from the same pricing.
In practice it often works the other way: because brokers compare the whole market, lenders sharpen their pricing to win broker-introduced customers, and a broker who knows a lender's discretionary pricing can negotiate below the advertised rate.
What about conflicts of interest?
The honest risk in a commission model is obvious: could a broker steer you toward whoever pays them most? Two protections deal with this directly:
Worth knowing: banks selling their own products carry no Best Interests Duty. The legal obligation to put you first exists on only one side of the counter — the broker's.
- The Best Interests Duty. Since 2021, brokers are legally required to act in your best interests. Recommending a worse loan because it pays better isn't just poor form — it's unlawful.
- Disclosure. Before you sign anything, your broker must give you documents showing how they're paid, including the actual commission on your recommended loan. At Rivo we walk you through those numbers rather than hoping you don't read them.
When it isn't free
'Almost all cases' is doing some work in our tagline, so let's define it. A small number of situations — typically complex commercial lending or loans too small for lenders to pay commission on — may involve a fee for service. If that ever applies to you, you'll know the exact amount before we do a single hour of work, in writing. No Rivo client discovers a fee after the fact.
Questions worth asking any broker (including us)
A good broker enjoys these questions. If one seems uncomfortable answering them, you've learned something valuable for free:
- 1. How many lenders are on your panel, and which ones do you actually use?
- 2. What commission will you earn on the loan you're recommending?
- 3. Why this lender over the next-best option?
- 4. What happens after settlement — will you review my loan, and how often?
Ask us anything — including how we're paid
Book a free, no-obligation assessment and we'll show you our numbers along with yours. Complete transparency from day one.
Common Questions Answered
Does using a broker cost me more on my interest rate?
No. Lenders do not charge higher interest rates to broker clients. In fact, brokers can often access discretionary pricing discounts below the bank's advertised branch rates.
What is the Best Interests Duty?
Introduced in 2021 under Australian law, the Best Interests Duty legally requires mortgage brokers to prioritize the borrower's best interests above all else when providing credit assistance.
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