Many homebuyers turn to mortgage brokers for their expertise and assistance when securing a mortgage. These professionals play a vital role in connecting borrowers with lenders and navigating the complex world of home financing. But, while their knowledge and guidance are invaluable, you might wonder how mortgage brokers are compensated for their services.
In this article, we’ll shed light on how mortgage brokers get paid and their compensation structure while providing a clearer understanding of how they operate.
When you’re looking for a mortgage, you have a few different options. You can go directly to a bank or lender or use a mortgage broker. Mortgage brokers are licensed professionals who can help you compare other mortgage options and find the best deal for your needs.
How Are Mortgage Brokers Paid?
Mortgage brokers are paid by lenders, not by borrowers. This means you don’t have to pay anything to use a mortgage broker. However, because they aren’t paid for their work, some mortgage brokers may turn away individuals if they think it’s too much hassle.
- There are two main ways that mortgage brokers get paid:
Upfront commission: When you take out a mortgage with a lender that the broker has referred you to, the lender will pay the broker a commission. This commission is typically a percentage of the loan amount (minus the savings you may have in your offset account). - Trail commission: Some lenders also pay mortgage brokers a trail commission. This is a smaller commission paid over the life of the loan, provided you are making your repayments on time. The amount of the trail commission is typically based on the loan balance.
Why Not Go Directly to the Bank?
It may surprise you, but going directly to the bank can actually be more expensive than approaching a mortgage broker. However, using a mortgage broker saves you money because they can access a broader range of mortgage products and negotiate on your behalf. Simplify Finance has access to over 30 lenders and guarantees you the best deal for your circumstances.
While you may think brokers will recommend a loan plan that benefits their commission earnings, since the introduction of the Best Interests Act by ASIC in 2021, it is illegal to do so. Therefore, you can rely on us to find mortgage rates that act in your best interest. Getting you the best interest rate and terms is part of our job.
Sounds simple enough, right? Well, not quite. Sometimes, mortgage brokers have to deal with clawback fees.
What are Clawback Fees, and How Do They Work?
Clawback fees are penalties imposed on mortgage brokers when a borrower exits a loan agreement and may occur when borrowers sell their property or refinance with a different lender. Lenders may then charge a “clawback fee”, which applies within the first two years of a home loan. Some mortgage brokers may charge their clients who broke the mortgage agreement. However, Simplify Finance does not do this.
Why Simplify Finance?
We understand the time and effort it takes to research lenders, fill out and submit applications, and gather documentation. We aim to maximise the time you have to do what you enjoy and spend with loved ones. Simplify Finance acts as your financial concierge, so you can do just that.
To ensure you get the best market rate on your mortgage, we review your loan every 6-12 months. So you have our ongoing support, and we are here whenever you need advice.
To Conclude
Understanding how mortgage brokers are compensated and the benefits they offer can significantly assist you in making informed decisions when it comes to securing a mortgage. Simplify Finance provides valuable expertise, access to various lenders and mortgage products, and personalised assistance.
If you would like to talk to someone about your financial goals or have any questions about home loans, fill out our contact form or book a call. We will guide you towards a mortgage solution that fits your needs and saves you time, money, and stress.
