How Commission, Clawback And Broker Fees Really Work In Australia

Most Australian mortgage brokers are paid by lenders via upfront and trail commissions, but clawback rules let lenders take that money back if you refinance or close the loan early, which is why some brokers now charge an upfront client fee. The right question isn’t “is the broker free?”, it’s “how is this broker paid, who can claw money back, and how does that affect advice and service?”

In short: lenders pay most brokers, clawbacks can reverse that pay if you move too early, and client‑paid fees are one way brokers manage that risk while funding a deeper service.

Upfront and trail commissions are paid by lenders but can be clawed back if you move your loan early.

1. How mortgage broker commissions and clawbacks work

Upfront and trail commissions in plain English

Most lenders pay brokers:

• Upfront commission – a one‑off payment when your loan settles (often around 0.5–0.7% of the loan amount, indicative only).
• Trail commission – a smaller ongoing payment calculated on the loan balance each month (often around 0.1–0.2% p.a., indicative only).

Example (illustrative only):

• Loan amount: $800,000
• Upfront commission at 0.65%: $5,200 before tax and business costs
• Trail in year one at 0.15%: $1,200 if the balance averages $800,000

This income funds all the advice, research, compliance, staff and ongoing support.

For a deeper breakdown of commission mechanics, see Do Mortgage Brokers Favour Higher Commissions? How Pay Really Works.

What is clawback – and why it matters to you

Clawback is when a lender takes back some or all of the upfront commission if your loan ends or reduces quickly in the first few years.

Typical (indicative) structures are:

*Terms vary by lender and aggregator.

If you refinance your $800,000 loan after 10 months, the lender might claw back the full $5,200 upfront. Your broker keeps little more than trail, often well under minimum wage for the hours involved.

The key point: you don’t pay clawback directly to the lender, but it hits your broker’s income and can influence how some brokers behave.

2. Why some brokers charge an upfront client fee

Funding a proper service instead of just a sale

A low‑margin, commission‑only model can push some brokers to chase quick, simple loans and avoid complex, time‑consuming clients. To avoid that, some move to a fee‑for‑service or hybrid model where you pay a transparent fee.

Common reasons brokers charge a client fee:

1. Complex scenarios – self‑employed, multiple entities, complex tax planning, multiple securities.
2. Smaller loans – where commissions don’t cover the work (e.g. < $300k top‑ups).
3. Strategy‑heavy work – restructuring, long‑term planning, or “what if” modelling where you may not transact immediately.
4. Clawback protection – smoothing income so they can still act in your best interests even if you refinance soon after.

If you’re wondering whether brokers are “really free” in practice, see Are Mortgage Brokers Really Free for Alexandria Borrowers? The Real Costs.

Broker fee vs commission: which is more expensive?

What matters is total cost over time, not whether money flows via the lender or from your bank account.

The right choice depends on your complexity, loan size and how much you value advice.