The property market in Australia is always changing, and so are the means Australians use to buy their ideal homes or properties. Ever since, the popularity of using mortgage brokers has been on the rise, as they are the usual choice for many borrowers. The MFAA reveals that mortgage brokers were involved in settling 76.0% of all residential home loans issued during the December 2024 quarter, which shows that more borrowers are trusting them. More borrowers are realising why knowing the mortgage broker fees and costs is important in Australia.

At Capkon Melbourne, we pride ourselves on providing real value as expert mortgage brokers. We believe in transparent communication, ensuring our clients fully comprehend how our services operate and any associated costs, allowing you to make informed decisions for your next property move.

Do Mortgage Brokers Charge Fees in Australia?

Many people ask us about fees, and it makes sense because it is such a common question. Don’t forget, in most cases, it is the lender, not the borrower, who pays brokers. Their income mostly comes from commissions that lenders give once a loan is complete. In most cases, you won’t have to pay any fees to your broker at the start of a home loan.

At the same time, some brokers charge extra fees when they assist with more complicated transactions. Our main source of income is lender-paid commissions at Capkon Melbourne, and we aim to ensure that clients do not need to pay any charges at the start of applying for a typical residential home loan.

Types of Fees Mortgage Brokers May Charge

Services from mortgage brokers are usually based on commissions, but there are times when they charge certain fees. It is important to spot these charges to avoid any confusion while applying for your loan.

Upfront Fees or Application Fees

Usually, brokers charge upfront fees or application fees to cover their first work, such as reviewing your finances and getting your application ready. Residential loans typically do not require this type of clause because they are only seen with complex or unique forms of lending.

You might wonder, “How much upfront commission does a mortgage broker receive?” We will delve into the details of commissions paid by lenders in a later section.

Commitment Fees

A commitment fee is offered by some brokers to verify how likely the client is to go ahead with the loan process. Thanks to the hard work brokers put in, this limits who spends time and money on the process.

Fee for Service Models

For the fee-for-service model, the mortgage broker asks for payment from the client, without relying only on compensation from lenders. It is usually put into action when a situation is particularly complicated in lending, and the lender’s commissions do not adequately cover what is involved. Such examples include hard-to-secure assets such as loans for Self-Managed Superannuation Funds (SMSF) or intricate financial setups that involve working with many models and terms.

Cancellation or Early Exit Fees

Sometimes, brokers might add clauses for cancellation or early exit fees if the client wants to cancel the loan after things have progressed a lot, or if the loan is paid off or refinanced soon after it was settled.

Clawback Fees (Passed to Clients)

When you ‘claw back’ commissions, you are getting reimbursed for the money paid to a broker if you refinance or pay out your loan completely within the first 12-24 months after settlement. It is usual for lenders and brokers to have clawback clauses in their contracts, yet brokers almost never charge their clients with clawback fees.

How to Compare Mortgage Broker Costs and Services

It’s good for you to research more than the estimated expenses of each mortgage broker; seek information on the services and how much experience they have, their access to loans, and their available networks. Thus, you can identify the best mortgage broker and properly analyse how each one is different. Look at the following aspects when deciding on a broker.

• Breadth of Lender Panel: A broker who contacts a large network of lenders can offer you a package customised to your needs.
• Expertise: If you buy your first home, purchase an investment or want an SMSF loan, look for a broker who is knowledgeable in those types of loans.
• Reputation and Client Reviews: Look for brokers who have many clients giving them good reviews and who are thought to follow ethical rules.
• Transparency: A trustworthy broker will explain their earning methods and any additional costs you might need to know about. A good way to learn about their fees is to simply ask them, “What fees do mortgage brokers charge?”
• Written Quotes or Estimates: The provision of written quotes or estimates lets you review the service offered clearly.

Average Mortgage Broker Fees in Australia

As discussed, the average mortgage broker fees in Australia are effectively zero for the client in most standard residential loan scenarios, as the broker is compensated by the lender. Unless it is a specialised service like a complex commercial loan or structured finance, where a direct fee-for-service model is agreed upon, the average client typically doesn’t pay out of pocket.

At Capkon Melbourne, we operate with transparent pricing, and our clients do not pay out-of-pocket fees for our standard residential mortgage broking services. Our remuneration comes from the lenders, aligning our success with yours in securing the right loan.

How Do Mortgage Brokers Get Paid? Understanding Commissions

In most cases, mortgage brokers get paid through commissions from the companies offering the mortgage loans. In general, these commissions consist of two primary parts.

• Upfront Commission: A one-off payment from the lender to the broker is called upfront commission. Most of the time, it represents a portion of the total loan. Most lenders have similar upfront commission rates of 0.65% to 0.70% of the total loan settlement, with GST added in. Example: Should a borrower borrow $600,000, the initial commission would be 0.65%, worked out to $3,900 (including the GST).
• Trail Commission: During the life of the loan (when it is still active with the lender), the broker is provided with a steady monthly trail commission by the lender. The amount could be from 0.15% to 0.275% per year (and includes GST) of your outstanding balance. The commission encourages brokers to support clients throughout the loan process and keep them happy with the loan. Example: A $600,000 loan with a 0.15% per year trail commission would mean paying $900 a year or $75 every month.

Be sure to remember that these commissions don’t cost you any more and are paid by the lender alone. They play a role in the marketing and acquisition of customers by the lender. Brokers get paid for arranging suitable loans for clients, even though borrowers do not need to cover any fees or charges directly.

Are Mortgage Broker Fees Tax-Deductible?

Investors and property owners most often ask, “Are mortgage broker fees tax-deductible?”. On the whole, most or all fees for getting a mortgage, in addition to some other borrowing expenses, are tax-deductible in Australia for investors but not for those with home loans.

When borrowing funds for an investment property, if the cost of some expenses, such as valuation and loan fees, exceeds $100, they will be amortised for 5 years or the loan’s term, whichever comes first. Anything under $100 in expenses is usually deducted right away. Always get help from a licensed tax advisor to find out about your status and make sure you comply with all ATO rules as they change.

Are All Mortgage Brokers Paid the Same by Lenders?

Although upfront and trail commissions are mostly the same for lenders in Australia, each one may offer some differences in their numbers and arrangements. Clawback periods vary from one lender to another, and even the same lender may offer different terms from time to time. Despite this, brokers must act in the clients’ best interests and follow new regulations that greatly lessen the risk of excessive broker-influenced advice.

The main goal is to make sure the broker chooses the commission-wise best option for you, not for themselves. Here, the differences occur rarely, and even if they do, they do not usually change the advice given about loans, thanks to the current standards governing mortgage brokers in Australia.

Benefits of Using a Mortgage Broker

The fact that mortgage brokers are becoming more popular in Australia proves that these professionals have significant benefits. Even though understanding their value is important, here are a few more benefits to consider:

• Loan Strategy and Structure: Brokers help you devise the most effective loan strategy tailored to your financial goals, whether it’s for a first home, investment, or refinancing. They can structure complex loans to maximise benefits.
• Lender Selection: With so many lenders available, brokers are able to compare a wide range of loans and pick only the ones that are best for your requirements.
• Application, Compliance, and Approvals: They improve the process, check the paperwork needs, and ensure businesses are compliant, which leads to a much greater chance of getting approved.
• Negotiation: Brokers can often negotiate better rates or terms on your behalf with lenders, leveraging their relationships and industry knowledge.
• Liaison with Solicitors and Lenders: It is now common for mortgage brokers to act as a central point, connecting with solicitors, real estate agents, and even lenders from the offer stage to settlement.

When you work with Capkon Melbourne, you can rest assured that qualified professionals will make the mortgage process easier and less expensive for you in the long run.

What to Ask Your Broker About Fees Before You Commit

Transparency is key when engaging a mortgage broker. To ensure you have a clear understanding of any potential mortgage broker charges, here are key questions to ask before you commit:

• Do you charge an upfront fee or any other fees? This is the most direct question to clarify any potential direct costs.
• Are you paid by the lender? This confirms the primary method of their remuneration.
• Do you pass on clawback fees? As discussed, most ethical brokers absorb these, but it’s good to confirm.
• Can you give me a written breakdown of costs? Requesting a written document provides clear, tangible information.
• Are you licensed and regulated? Ensure they hold the necessary Australian Credit Licence (ACL) or are a Credit Representative of an ACL holder, as required by ASIC.

Understanding “what fees do mortgage brokers charge” upfront will build trust and ensure a smooth process.

Final Thoughts

Navigating the Australian mortgage landscape can be complex, but understanding mortgage broker fees and the overall mortgage broker cost in Australia is crucial. For most standard residential loans, the good news is that borrowers typically do not pay direct fees to their mortgage broker, as lenders compensate brokers through upfront and trailing commissions.

While specific situations like complex commercial loans or fee-for-service models may involve direct client fees, a transparent broker will always communicate these clearly upfront. The benefits of using a broker—from extensive lender access to expert guidance and streamlined processes—often far outweigh any perceived costs, ultimately saving you time, stress, and potentially money over the life of your loan.

Choose Capkon Melbourne for Transparent, Ethical Mortgage Broking

At Capkon Melbourne, we believe in a client-first approach. We differentiate ourselves by offering unparalleled transparency, a comprehensive understanding of the market, and a commitment to securing the best possible financial outcome for you. We aim to make the mortgage process seamless and stress-free, ensuring you are fully informed about how we operate and how we get paid. There are no hidden mortgage broker fees when you work with Capkon Melbourne.

Ready to explore your mortgage options with a trusted expert? Reach out to Capkon Melbourne for a consultation and a clear cost breakdown.

FAQ

Is it better to use a mortgage broker or go directly to a bank?

Taking advantage of a mortgage broker, you can search among many more lenders and different types of loans than you could if you only went to one bank. Many options are evaluated by brokers, and they might find you a deal that matches your needs better than those offered by just a bank.

Do mortgage brokers work with all lenders in Australia?

Even though mortgage brokers are associated with a large pool of lenders, they usually cannot work with all lenders in Australia. Nevertheless, there will be many ways for them to explore and compare nutrient information.

Can a mortgage broker help if I have bad credit or unusual circumstances?

Yes, experienced mortgage brokers typically help clients who have a range of financial situations, such as those with credit problems or unusual earnings. These experts know which lenders or methods for borrowing are not provided by mainstream organisations.

How do I know if my mortgage broker is trustworthy?

To see if your broker is trustworthy, ensure they hold an Australian Credit Licence (ACL) or are listed as a Credit Representative on the Australian Securities and Investments Commission (ASIC). Check the feedback clients have written and make use of referrals. You should be able to depend on a broker who is upfront concerning their fees and charges.

How much upfront commission does a mortgage broker receive?

Usually, a mortgage broker earns a commission of 0.65% to 0.70% (with GST) from the lender after the loan is settled. Lenders pay this cost themselves.

Will using a mortgage broker impact my credit score?

Usually, a mortgage specialist will first undertake a soft credit check that does not harm your credit score. Hard inquiries that can influence your credit score are generally made by a lender only after you give them your formal permission.

How long does the mortgage approval process take with a broker?

The process of getting a mortgage approved can change from lender to lender and also based on how complex your application is. The broker may need a few days to a week to help gather the necessary information and prepare the needed documents. After you have applied, the lender may take a few days or more before processing. A broker can organise all necessary documentation properly, which can make the process go more quickly.

Can I switch mortgage brokers midway through the loan process?

If you’re not satisfied with your broker, try switching as soon as possible, during the early phases of trading. Submitting a mortgage application may cause the process to become more intricate because the initial broker could have informed a lender about you.

What happens if I refinance or sell my property early?

Within the first year or two of getting a loan, if you refinance or sell your property, the lender might keep the upfront fee that was paid to the original broker.

Do brokers offer advice on government schemes like the First Home Guarantee?

Yes, mortgage brokers who have experience can discuss with you the different government schemes, grants, and concessions for borrowers, like the First Home Guarantee (previously known as the First Home Loan Deposit Scheme) and outline your eligibility and the way to access them.

Can I use a mortgage broker for investment properties or refinancing?

Absolutely. Mortgage brokers are highly skilled in assisting with loans for investment properties and refinancing existing mortgages. They can help you structure investment loans for tax efficiency and find competitive refinancing options to reduce your repayments or access equity.