Do Mortgage Brokers in Victoria Charge Fees, or Are They Paid by the Lender?

By Lowest Interest Rates Australia

Introduction

When I first decided to buy a home in Melbourne, I assumed working with a mortgage broker would cost me a small fortune. After all, they do all the heavy lifting — finding lenders, negotiating rates, and handling paperwork. But then I learned something surprising: most brokers don’t actually charge you a fee at all! Instead, they’re usually paid by the lender once your loan is approved.

Of course, like everything in the world of finance, the real answer isn’t quite that simple. There are a few exceptions, hidden costs to watch for, and situations where a fee might apply. So, let’s clear the air and break it down properly.

In this guide, I’ll explain exactly how mortgage brokers in Victoria are paid, when you might be charged directly, and how to make sure you’re working with someone who’s transparent and fair. Whether you’re buying your first home or refinancing your current one, understanding this is key to making confident financial decisions.

Table of Contents

1. How Mortgage Brokers Get Paid
2. Understanding Broker Commissions
3. When Mortgage Brokers in Victoria May Charge a Fee
4. Why Some Brokers Charge Fees — and When It’s Justified
5. How to Ensure Transparency in Broker Fees
6. Key Questions to Ask About Broker Fees
7. Why Using a Broker Can Still Save You Money
8. The “Free Broker” Myth Explained
9. Final Thoughts — Partner with Lowest Interest Rates

How Mortgage Brokers Get Paid

Mortgage brokers in Victoria (and across Australia) are typically paid by lenders through commissions — not by you, the borrower. This is how they make their income while still keeping their service free for most customers.

Here’s how it works:

• Upfront commission: Paid by the lender once your home loan settles — usually a percentage of the total loan amount.
• Trail commission: An ongoing, smaller payment made by the lender as long as your loan remains active with them.

This structure encourages brokers to build long-term relationships with clients and helps them continue offering advice throughout your loan’s life.

Understanding Broker Commissions

To understand what your broker earns (and why it matters), let’s look at typical commission rates:

1. Upfront Commission

This is a one-time payment the lender makes to the broker when your loan settles. It usually ranges from 0.5% to 0.7% of the total loan amount. For example, if your mortgage is $600,000, your broker may receive between $3,000 and $4,200 from the lender.

2. Trail Commission

Trail commission is an ongoing payment — generally around 0.15% per year of the remaining loan balance. It’s a small incentive for brokers to maintain ongoing client relationships and ensure you stay satisfied with your loan.

While it’s natural to wonder whether this creates a conflict of interest, government regulations and industry ethics codes (like those from the MFAA and ASIC) require brokers to act in the best interests of the borrower — not the bank.

When Mortgage Brokers in Victoria May Charge a Fee

Although most brokers don’t charge upfront fees, there are exceptions. A broker might charge you directly if:

• Your loan is very small (e.g. under $200,000), where commissions from the lender are minimal.
• Your situation is complex — such as being self-employed, having bad credit, or seeking specialised financing.
• You’re using a broker for a one-off service, like credit advice or a loan health check, without proceeding with a lender.

Even in these cases, reputable brokers will always disclose potential fees upfront and explain exactly what they’re for.

Why Some Brokers Charge Fees — and When It’s Justified

Sometimes, paying a broker fee is actually a smart move. Here’s why:

• They’re doing extra work: Complex loans require more time, research, and negotiation.
• They’re independent: Some boutique brokers operate independently and prefer to charge a fee to avoid reliance on lender commissions.
• They’re finding non-mainstream loans: If your loan involves a private lender or commercial funding, there may be no commission available, so the fee covers their time and expertise.

In Victoria, the average broker fee (if charged) ranges from $300 to $1,000, depending on complexity. However, many brokers — including Lowest Interest Rates — offer free consultations and earn only from lender-paid commissions, so you can get professional advice without any upfront cost.

How to Ensure Transparency in Broker Fees

Legally, brokers in Victoria must disclose how they’re paid and whether they receive commissions, bonuses, or other incentives. This information should appear in a document called a Credit Quote and Proposal Disclosure.

Before signing anything, ask your broker to provide this document — it outlines:

• Their fee structure (if applicable)
• The lenders they work with
• Any potential conflicts of interest

If your broker hesitates or can’t explain their commissions clearly, that’s a red flag.

Key Questions to Ask About Broker Fees

Want to make sure your broker is being upfront? Ask these:

1. Do you charge me any fees, or are you paid by the lender?
2. What commission do you earn from my loan?
3. Do all lenders on your panel pay you the same rate?
4. How do you ensure your recommendations are in my best interest?
5. Will I get a breakdown of all costs before we proceed?

Honest brokers will answer confidently and provide documentation. Shady ones? They’ll dodge or downplay the details. Always choose transparency over convenience.

Why Using a Broker Can Still Save You Money

Even though brokers earn commissions, they can still save you more money than going directly to a bank. Here’s how:

• Better access: Brokers compare dozens of lenders — not just the big four banks — to find the most competitive rates.
• Negotiation power: Because brokers send multiple clients to lenders, they often secure discounts you couldn’t get alone.
• Expert guidance: A broker ensures your application is strong, increasing your chances of approval and minimising delays.
• Ongoing support: The best brokers review your loan regularly and recommend refinancing when a better deal becomes available.

So even though your broker is paid by the lender, their goal is to earn your trust — and your future referrals — by saving you as much as possible.

The “Free Broker” Myth Explained

Let’s be real — no one works entirely for free. But in this case, the costs are built into the system in a way that benefits borrowers.

Lenders budget for commissions as part of their marketing expenses. Whether you go directly to a bank or through a broker, you’ll usually pay the same loan rate. The difference? Your broker compares options for you instead of you doing it alone — so you get more choice without paying extra.

That’s what makes brokers such a valuable part of the Australian home loan market. You get personalised service, expert negotiation, and no direct cost in most cases.

Final Thoughts — Partner with Lowest Interest Rates

So, do mortgage brokers in Victoria charge fees, or are they paid by the lender? In most cases, the answer is simple: they’re paid by the lender, and their service costs you nothing upfront. But that doesn’t mean you shouldn’t ask questions or seek transparency — because the best brokers welcome them.

The team at Lowest Interest Rates believes in complete honesty and clarity. They’ll walk you through exactly how they’re paid, what lenders they work with, and why they recommend certain products — so you can make informed, confident decisions about your home loan.

Whether you’re buying your first home, refinancing, or investing, working with a trusted, transparent broker can save you time, stress, and thousands in repayments.

Visit LowestInterestRates.com.au today to connect with a friendly Melbourne-based broker who’ll help you find your best loan — and explain every step along the way.