What a broker actually does
A mortgage broker sits between you and the banks. They look at your income, savings, and what you want to buy, then search their panel of lenders for loans that fit. Most brokers have access to 20 to 40 lenders, including the big four banks, smaller banks like ING and Macquarie, and non-bank lenders.
Once you pick a loan, the broker handles the application, chases the paperwork, and talks to the lender on your behalf. If there is a problem, they sort it out. If the first lender says no, they can try another one without you starting from scratch.
A bank employee, by comparison, can only offer you that bank's products. They have no legal obligation to tell you if a better deal exists elsewhere.
How brokers get paid
Most brokers are free to use. The lender pays them two commissions:
Upfront commission: Typically 0.40% to 0.70% of the loan amount, paid once at settlement. On a $600,000 loan, that is roughly $2,400 to $4,200.
Trail commission: Typically 0.15% to 0.20% of the outstanding balance per year, paid for as long as you keep the loan. On $600,000, that is about $900 to $1,200 a year.
This money comes from the lender, not from you. You do not pay the broker directly. The lender builds the commission into their cost of doing business. In most cases, the interest rate is the same whether you use a broker or go direct, though some lenders offer lower "direct only" rates. A good broker can often negotiate rates that are below what you would get walking into a branch.
Some brokers may also receive volume bonuses or other benefits from lenders or aggregators beyond standard commissions. You can ask your broker about these.
The conflict of interest (and the law that addresses it)
The obvious tension: a bigger loan means a bigger commission. And some lenders pay higher commissions than others. That is a real conflict of interest.
In January 2021, the Best Interests Duty came into effect under the National Consumer Credit Protection Act 2009, following a recommendation from the Banking Royal Commission. It has two parts: brokers must act in your best interests when providing credit assistance, and where there is a conflict between your interests and theirs, they must prioritise yours.
This obligation applies to brokers but not to bank staff. That is worth knowing. Bank staff are still subject to responsible lending laws (they cannot recommend a loan that is unsuitable for you), but they have no duty to find you the best deal across the market. A broker does.
What about paid brokers?
A small number of brokers charge you a fee directly, typically $1,000 to $3,000 for a standard home loan. In return, they may rebate some or all of the lender commission back to you, which can lower your interest rate slightly. Not all paid brokers rebate the full commission, so ask for a written breakdown of what they keep and what they pass back.
Paid brokers hold the same licensing and are subject to the same Best Interests Duty as commission-based brokers.
Paid brokers make sense in a few situations:
- Your lending situation is complex (self-employed, trust structure, mixed commercial and residential)
- You want the assurance that the recommendation has zero connection to commission
- Your loan is large enough that a small rate reduction saves more than the fee
For most first home buyers with a straightforward PAYG income and a standard home loan, a commission-based broker is fine. The best interests duty provides a meaningful safeguard, and the service is free.
Ten questions to ask your broker
1. How many lenders are on your panel?
More lenders means more options. 20 to 40 is typical.
2. What aggregator are you with?
The aggregator determines which lenders your broker can access. Two brokers at different aggregators may have different panels.
3. Which lender do you place the most loans with?
If one lender dominates, ask why.
4. How are you paid on this loan? Can I see it in writing?
They are required to disclose this in the Credit Proposal Disclosure document. Ask for specific numbers.
5. Do any lenders pay you more than others?
A direct question. A good broker will answer honestly.
6. What are the stamp duty concessions and grants for first home buyers in my state?
These can save you $10,000 to $30,000+. Thresholds differ by state and change regularly. Your broker should know the exact current rules.
7. What happens if my first application is declined?
A good broker has a plan B.
8. Will you help me get pre-approval, and how long does it take?
Pre-approval shows sellers you are serious. Most take 1 to 5 business days. Note: pre-approval is not a guarantee of finance and typically expires in 90 days.
9. What are my LMI options if my deposit is under 20%?
LMI can cost $8,000 to $40,000+. Some lenders discount it, some let you capitalise it, and government guarantees can help you avoid it entirely.
10. Do you do annual rate reviews after settlement?
The trail commission means they have a reason to keep you happy. Hold them to it.
Can you skip the broker and do it yourself?
Yes. Plenty of people get a home loan by walking into a bank or applying online. If you are comfortable comparing rates, reading product disclosure statements, and managing the application process, you can absolutely do it yourself.
Here is when going direct works well:
- You already bank with a lender that has a competitive rate
- Your situation is straightforward (PAYG income, single property, no HELP debt)
- You enjoy comparing products and reading the fine print
- You have a clear idea of the loan features you want
The main trade-off is time. A broker compares 20 to 40 lenders in one conversation. Doing it yourself means contacting each lender individually, comparing rates, fees, features, and policies. That is not hard, but it takes effort.
One advantage of going direct: some lenders offer "direct only" deals that brokers cannot access. It is worth checking your own bank's rate before or after talking to a broker. You can always use the broker's best offer as a negotiating tool with your bank.
One thing to watch: every formal loan application creates a hard credit enquiry on your file. Multiple applications in a short period can reduce your borrowing capacity. A broker submits one application at a time. If you go direct and apply to three or four banks, that shows up. Compare rates and get quotes first, then apply to the one you choose.
If your deposit is under 20%: you will likely need Lenders Mortgage Insurance (LMI), which can cost $8,000 to $40,000+ depending on your loan size and deposit. Some lenders discount LMI through broker channels but not direct. Government schemes like the First Home Guarantee can help you avoid LMI entirely with just a 5% deposit. A broker can navigate these options for you, which is one reason the decision tree suggests using a broker for most first home buyers.
What to look for in a home loan
Whether you use a broker or go direct, these are the features that matter most for a first home buyer.
Offset account
This is the single most useful feature on a home loan. An offset account is a transaction account linked to your mortgage. The balance in it reduces the interest you pay. If you owe $500,000 and have $30,000 in your offset, you only pay interest on $470,000.
On a $600,000 loan at 5.5%, keeping $30,000 in your offset saves you an estimated $60,000 to $70,000 in interest over 30 years and takes years off the loan. Your actual savings depend on your loan size, rate, and how the balance changes. Your money stays accessible. You can spend it any time. It just works harder while it sits there.
Tax tip: If there is any chance you will rent out this home later, an offset account preserves your tax deduction in a way that redraw does not. Talk to an accountant about this before you choose.
Extra repayments without penalty
Variable loans usually let you pay as much extra as you want. Fixed-rate loans typically cap extra repayments at $10,000 to $30,000 per year. Even an extra $100 a month on a $500,000 loan takes roughly 3 years off a 30-year term.
Redraw facility
If you make extra repayments, a redraw facility lets you pull that money back out if you need it. Not as flexible as an offset: there can be processing time, minimum amounts, and some lenders can restrict access. If you might convert this home to an investment property later, an offset is better for tax reasons (see above).
Comparison rate
The headline rate is not the full picture. The comparison rate includes most fees and charges, calculated over a $150,000 secured loan over 25 years. It is better than the headline rate for comparing, but less useful for larger loans because fees are spread over a smaller base. A $600 annual fee looks very different on $150,000 than on $700,000.
Fixed vs variable
Fixed gives you certainty for 1 to 5 years. Variable moves with the market but usually offers more features (offset, unlimited extra repayments). Many buyers split their loan: part fixed for stability, part variable for flexibility.
Break costs: If you sell, refinance, or make large extra repayments during a fixed term, the lender can charge break costs of thousands of dollars. Ask for the break cost formula before you fix. If there is a chance you will sell within the fixed period, variable or a split may be safer.
Red flags
- They only ever recommend one lender.
- They will not tell you how much they earn on the loan.
- They encourage you to borrow more than you are comfortable with.
- They rush you to sign without reading the documents.
- They suggest overstating your income or understating your expenses. This is fraud.
- They do not give you a Credit Guide at or before the first meeting. This is a legal requirement under the National Consumer Credit Protection Act.
- They do not give you a Credit Proposal Disclosure document before you sign. This document sets out the loans they considered, why they recommended a particular one, and how much they will be paid. Read it before you sign anything.
- They recommend their in-house conveyancer or financial planner without disclosing referral fees.
How to find a broker
Ask friends or family who have bought recently. That is the most reliable way. The MFAA and FBAA are industry associations (not regulators) that maintain directories of member brokers. Membership is voluntary but most reputable brokers belong to one. Read Google reviews. Look for someone who specialises in first home buyers.
Every broker must be an authorised credit representative listed on the ASIC register, or hold their own Australian Credit Licence. You can verify this on the ASIC Connect professional registers at connectonline.asic.gov.au. They must also be a member of the Australian Financial Complaints Authority (AFCA). If they are not, walk away.
Your rights
Cooling-off period: After signing a credit contract, you have a right to rescind it within a specified period under the National Credit Code. The lender can charge a small fee for this, but it gives you a window to change your mind. Ask your broker or lender for the exact timeframe.
If something goes wrong: Complain to your broker first through their internal complaints process. If that does not resolve it, you can escalate to the Australian Financial Complaints Authority (AFCA) at afca.org.au. AFCA is free for consumers and can order compensation if the broker has done the wrong thing.
Important: This guide is general information only. It is not financial advice, credit assistance, or a recommendation of any financial product. It does not take into account your individual objectives, financial situation, or needs.
housematch.com.au does not hold an Australian Credit Licence and is not authorised to provide credit assistance under the National Consumer Credit Protection Act 2009. We do not receive referral fees or commissions from any mortgage broker or lender.
Before making any decisions about your home loan, speak to a licensed mortgage broker or financial advisor. Commission structures, government schemes, and regulatory requirements may have changed since this page was last reviewed.
Last reviewed: March 2026.