When you set out to purchase a house and need a home loan, or are looking to look at better options than your current loan, you may want the help of an expert. A mortgage broker can help you understand your options, based on the interest rates and terms offered by different lenders.
The mortgage broker also works with you to put together the paperwork you’ll need to apply for the loan. Mortgage brokers are paid a commission by lenders, so you usually don’t need to pay a thing for their services.
All mortgage brokers in Australia need to either hold an Australian Credit License (ACL) or be an Authorised Credit Representative (ACR) of a license holder. This license holder may be a mortgage aggregator – a business that provides services to brokers with resources like broking software, commission processing, and access to lender panels.
Brokers also need to comply with the rules and regulations outlined by ASIC — the Australian Securities and Investments Commission.
Mortgage broker vs mortgage loan officer
Mortgage brokers suggest home loan options to buyers, connect buyers with suitable lenders, and assist with documentation. A mortgage broker may be able to help simplify the process of evaluating different banks or mortgage lenders and comparing interest rates.
On the other hand, mortgage loan officers process loans for the financial institution they are employed by, such as a credit union, institutional bank, or mortgage lender.
What are a mortgage broker’s commission and trail commission?
Mortgage brokers receive a commission from lenders for connecting them with new customers. Some lenders pay broker commissions at a fixed rate regardless of what they recommend to property buyers, while others may pay more for brokers who offer certain loans. In a few rare cases, a mortgage broker may charge the buyer a fee rather than taking a lender’s commission.
The mortgage broker commission structure paid by lenders usually includes an upfront commission and a trail commission.
An upfront commission is where the lender pays the mortgage broker a commission to introduce its home loans to home buyers.
A trail commission is a deferred payment, paid by a lender to a broker every month over the life of the loan, as long as the borrower keeps up with their repayments.
How much commission does a mortgage broker make?
The average mortgage broker's upfront commission is a percentage of the loan balance. The exact amount may vary from lender to lender, but may fall between 0.65% and 0.7% plus GST.
Trail commission will be received by the mortgage broker every month for the life of the loan. This trail commission is based on a percentage of the remaining loan amount each month, and may range anywhere from 0.15% to 0.275% plus GST.
Mortgage brokers are required by law to disclose the commissions they may receive for recommending different loan options to you. Brokers are also obliged to act in your best interest when you’re looking for a home loan. If you’re concerned about a broker’s commissions, don’t be afraid to ask.
How much is the average commission for a mortgage loan officer?
A mortgage loan officer is an employee of a bank or other financial institution. As they do not receive a commission for signing you up to a home loan.