Mortgage Brokers: What They Do and How to Choose the Right One

Buying a home is one of the biggest financial decisions most Australians will make, and securing the right home loan is an essential part of that journey. While you can go directly to a bank or lender, many Australians are turning to mortgage brokers to help navigate the increasingly complex mortgage market. But what exactly do mortgage brokers do, and how do you choose a good one?

This article provides a detailed overview of mortgage brokers in Australia. We explain what they do, how they get paid, the benefits of using a broker, and how to make sure you’re working with a reputable and experienced professional. Whether you’re buying your first home, refinancing, or investing in property, this guide will help you understand how a broker can simplify your loan experience and potentially save you thousands of dollars.

What Is a Mortgage Broker?

A mortgage broker is a licensed financial professional who acts as an intermediary between borrowers and lenders. Rather than being tied to a single bank or financial institution, brokers have access to a wide panel of lenders and a variety of home loan products. Their role is to assess your financial situation and recommend a home loan that suits your needs, preferences, and borrowing capacity.

In Australia, mortgage brokers must be licensed through the Australian Securities and Investments Commission (ASIC) and either hold an Australian Credit Licence or be a credit representative of someone who does.

What Does a Mortgage Broker Do?

Mortgage brokers perform several key tasks that help borrowers throughout the home loan journey. Their responsibilities include:

1. Assessing Your Financial Situation

The broker will ask for documentation such as payslips, tax returns, bank statements, and identification. They assess your income, expenses, assets, debts, and credit score to determine your borrowing power and which loans you’re eligible for.

2. Comparing Home Loan Products

With access to multiple lenders and loan products, brokers compare interest rates, features, fees, and policies to find suitable options. They consider your personal goals, such as whether you need an offset account or want the ability to make extra repayments.

3. Explaining Loan Features

A good broker will explain complex terms such as fixed vs variable rates, comparison rates, Lenders Mortgage Insurance (LMI), redraw facilities, and more. Their role is to ensure you understand your options fully.

4. Lodging Your Application

Once you select a loan, the broker gathers the required paperwork and submits the application to the lender on your behalf. They communicate with the lender throughout the process and keep you updated on the application status.

5. Following Through to Settlement

Brokers assist with the entire process until the loan is approved and settled. They help coordinate with your solicitor or conveyancer and make sure everything is completed on time.

Benefits of Using a Mortgage Broker

There are several advantages to using a mortgage broker instead of going directly to a bank or lender.

1. Greater Choice

Instead of being limited to one bank’s products, brokers have access to dozens of lenders, including major banks, second-tier lenders, credit unions, and non-bank lenders. This increases your chances of finding the most competitive and suitable loan.

2. Expert Guidance

Brokers understand lender policies and the home loan approval process. They can recommend lenders that are more likely to approve your application based on your financial profile.

3. Time Savings

Researching, comparing, and applying for a loan can be time-consuming. A broker does the legwork for you, saving you hours of research and paperwork.

4. Potential Cost Savings

By helping you find a better interest rate or a loan with fewer fees, brokers may save you thousands of dollars over the life of your loan.

5. Personalised Service

Brokers provide one-on-one support and take the time to understand your situation. This is particularly helpful for self-employed borrowers, first-time buyers, or those with complex financial arrangements.

How Are Mortgage Brokers Paid?

Most mortgage brokers in Australia are paid a commission by the lender when your loan is successfully settled. This typically includes:

Upfront Commission: A one-time payment based on a percentage of the loan amount.
Trail Commission: Ongoing monthly payments while the loan remains with that lender.

Importantly, this commission does not come out of your pocket. The lender pays the broker, and you won’t pay more for your loan than if you went directly to the lender.

However, it’s essential to check that your broker is acting in your best interests, not simply recommending loans that offer them higher commissions. As of January 2021, brokers are legally required to act in the best interests of their clients under new regulations introduced by ASIC.

How to Choose a Good Mortgage Broker

Not all mortgage brokers are the same. To ensure you’re working with a knowledgeable, ethical, and effective broker, consider the following tips:

1. Check Their Credentials

Make sure the broker is licensed with ASIC
Verify that they are a member of the Mortgage & Finance Association of Australia (MFAA) or the Finance Brokers Association of Australia (FBAA)
Confirm that they have an Australian Credit Licence or are a credit representative

2. Ask About Their Lender Panel

Ask how many lenders they work with and whether they can explain how they choose which loans to recommend. A larger lender panel gives you more choice, but it’s also important that they match you with the right lender, not just the most popular one.

3. Review Their Experience

Choose a broker with a proven track record and strong reviews. Experience can make a big difference in navigating tricky loan approvals or unique borrower profiles. Ask how long they’ve been in the industry and what types of loans they specialise in.

4. Understand How They Get Paid

Ask your broker to disclose their commission structure. They are legally required to tell you who pays them, how much, and whether they receive any volume-based incentives or bonuses.

5. Check for Transparency

Good brokers are upfront about fees, interest rates, comparison rates, and the total cost of your loan. Avoid brokers who seem reluctant to provide full details or pressure you into quick decisions.

6. Look for Ongoing Support

Some brokers continue to support their clients even after the loan is settled. They might review your loan annually, help you switch to a better product, or assist with refinancing later on. Ask whether they offer ongoing service or just focus on the initial approval.

When Should You Use a Mortgage Broker?

Mortgage brokers are helpful in many scenarios, especially when:

You’re buying your first home and need help understanding the process
You have a unique financial situation (self-employed, multiple income sources, poor credit history)
You’re short on time and want someone else to handle the paperwork
You want access to a broader range of loan options
You’re refinancing and want to compare multiple products quickly

What Questions Should You Ask a Mortgage Broker?

Before you commit to working with a broker, consider asking these questions:

Are you licensed and accredited?
How many lenders are on your panel?
How do you decide which loans to recommend?
Do you charge any fees?
Can you provide a loan comparison document?
Will you help with the paperwork and follow-up?
Do you offer post-settlement reviews?

The answers to these questions can help you determine whether the broker is genuinely acting in your best interests.

Red Flags to Watch Out For

While most brokers are reputable, watch for warning signs such as:

Pushing one lender without explaining alternatives
Being vague about commissions or how they are paid
Unwillingness to provide documentation in writing
Not asking for detailed financial information before recommending a loan
Offering unrealistic promises or fast approvals without proper checks

Regulation and Consumer Protection

The mortgage broking industry in Australia is regulated by ASIC and subject to the National Consumer Credit Protection Act 2009. Brokers must meet strict compliance and disclosure obligations. Key protections include:

Best Interests Duty: Brokers must prioritise the borrower’s interests above all else
Responsible Lending: Loans must be suitable and not place the borrower in hardship
Disclosure Requirements: Brokers must clearly explai