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What Does a Mortgage Broker Do?

A mortgage broker finds a lender that will approve your loan on the best terms available to you, then manages the application through to settlement. Here is what that involves at each step.

A mortgage broker assesses your finances and goals, compares loans from a panel of lenders, recommends one that is in your best interests, prepares and lodges the application, deals with the lender and valuer, and manages the loan through to settlement. In Australia brokers must hold a credit licence or be authorised under one, and they are legally required to act in your best interests.

The part most people do not see is policy matching. Every lender has its own rules about income, expenses, deposits and property types, and the same application can be declined by one lender and approved by another. Most of a broker's value is knowing which is which before anything is lodged.

What a broker does, step by step

  1. Understands what you are trying to do. Buying, refinancing, investing or building, and your timeframe.
  2. Assesses your position. Income, expenses, debts, credit history, deposit and the property. Responsible lending law requires the broker to make reasonable inquiries and verify what you tell them.
  3. Compares lenders. Pricing, features and, above all, credit policy across the lenders on their panel.
  4. Recommends a loan. The recommendation must be in your best interests, and the broker must give you a credit proposal disclosure document explaining fees and commissions before you apply.
  5. Lodges and manages the application. Documents, lender questions, the valuation and conditions of approval.
  6. Gets you to settlement. Coordinating with the lender, your conveyancer and, for refinances, the outgoing lender.
  7. Stays available afterwards. A good broker reviews the loan periodically and tells you when it has stopped being competitive.

The rules brokers work under

Best interests duty. Since 1 January 2021 mortgage brokers have been legally required to act in the best interests of consumers and to prioritise the consumer's interests where there is a conflict. Disclosure. You receive a Credit Guide at first contact and a credit proposal disclosure setting out fees and commissions before you apply. Licensing. Brokers must hold an Australian Credit Licence or be a credit representative of a licensee; you can check on ASIC's professional registers. See our Credit Guide.

What a broker does not do

A mortgage broker is not a financial adviser, a tax agent or a lawyer. They can tell you what a loan structure does, but not whether an investment is a good idea or how to minimise tax. They also do not have access to every lender. Each broker works with a panel, so it is fair to ask how many lenders they use and whether any is related to their business. See who owns your mortgage broker.

How brokers are paid

In most home loans the lender pays the broker an upfront commission at settlement and a smaller trail commission over the life of the loan, so there is no fee to the borrower. Some brokers charge fees for complex or commercial work, which must be disclosed. The details are in how mortgage brokers get paid and are mortgage brokers free.

Common questions

For most borrowers, yes, especially where anything about the application is unusual. See are mortgage brokers worth it for when going direct to a bank makes sense.

An initial conversation does not. A credit enquiry is recorded when an application is submitted to a lender, which is one reason to choose the right lender first rather than applying to several.

A straightforward pre-approval can take days; a full approval commonly takes one to three weeks once documents are complete, and longer for complex or self-employed applications.

Often. A decline from one lender reflects that lender's policy. See why home loan applications get declined.

Benjamin Marzouk

Mortgage broker, LNB Finance

Benjamin Marzouk is the broker behind LNB Finance, working with clients across the St George, Bayside and Sutherland Shire areas from Sans Souci, and arranging finance Australia-wide. He compares more than 60 lenders and is not owned by, or aligned to, any bank.

Credit Representative 551447 under Australian Credit Licence 384324, held by Outsource Financial Pty Ltd. LNB Finance Pty Ltd, ABN 83 668 176 083, and is subject to the Best Interests Duty. Both licence numbers are publicly searchable on ASIC Connect. Read our Credit Guide.

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