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What Is a Home Loan Broker? How They Work and Whether You Need One

A home loan broker compares loans from many lenders, helps you apply and manages the process until settlement. Here is what they do, how they get paid and when using one makes sense.

If you are buying, refinancing or investing, you have probably wondered what is a home loan broker and why so many Australians use one. In short, a home loan broker is a licensed finance professional who finds and arranges a loan for you, instead of you going to one bank and accepting whatever it offers.

This guide explains what a home loan broker does, how they are paid, what the rules say, and how to decide if one is right for you. You can also see how we help on our home loans page.

What Is a Home Loan Broker?

A home loan broker (also called a mortgage broker) sits between you and the lenders. A bank can only offer you its own products. A broker works with a panel of lenders, which can include major banks, smaller banks, credit unions and non-bank lenders, so you see a wider range of options in one conversation.

In Australia, brokers must either hold an Australian Credit Licence or act as a credit representative of a licensed business. They are regulated by ASIC, and must be a member of an external dispute resolution scheme, which gives you somewhere to take a complaint.

What Does a Home Loan Broker Do?

A good broker does far more than hand you a rate. Typical services include:

• Understanding your goals: buying your first home, upgrading, refinancing, investing or consolidating debt.
• Working out your borrowing power: what you can borrow based on income, expenses, debts and deposit.
• Comparing loans: interest rates, fees, offset accounts, redraw, fixed or variable options and features.
• Handling paperwork: collecting documents, completing the application and answering the lender's questions.
• Managing the approval: chasing the lender, handling valuations and keeping you updated through to settlement.
• Reviewing your loan later: checking whether a better deal is available as your circumstances or rates change.

How Does a Home Loan Broker Work? Step by Step

1. Free initial chat. The broker asks about your income, savings, debts, goals and timeline.
2. Loan options are compared. They shortlist loans that fit and explain the trade-offs in plain language.
3. You choose and apply. The broker prepares and lodges the application with your chosen lender.
4. Approval and conditions. The lender assesses the loan, orders a valuation and may ask for more information.
5. Settlement. Your solicitor or conveyancer coordinates with the lender and the loan is paid out.

For a closer look at each stage, see our loan process page.

How Do Home Loan Brokers Get Paid?

Most brokers are paid a commission by the lender once your loan settles. Many also receive a smaller ongoing (trail) commission while the loan stays with that lender. This is usually built into the lender's pricing, so you do not pay the broker separately for a standard loan.

Some brokers also charge a fee for complex work, and this should always be disclosed to you before you proceed. Ask upfront how your broker is paid. We explain this in more detail in our guide to mortgage broker fees.

Are Home Loan Brokers Regulated?

Yes. Brokers must act in your best interests when giving credit assistance for a consumer home loan, and they must prioritise your interests if there is a conflict with their own. They must also meet licensing, disclosure and ongoing training requirements. You can check a broker's licence on the ASIC registers before you engage them.

Home Loan Broker vs Going Direct to a Bank

We compare the two in more detail in home loan broker vs bank.

When Is a Home Loan Broker Worth Using?

• First home buyers who want the process explained and grants or concessions checked.
• Refinancers who want to know if a better rate or structure is available. See our refinance loans page.
• Property investors building a portfolio who need the right structure and lender policies. See investment loans.
• Self-employed or non-standard income borrowers who may need a lender with flexible assessment.

It may matter less if you already know exactly which loan you want and are comfortable doing the application yourself. Even then, a quick comparison costs little.

How to Choose a Good Home Loan Broker

• Check their Australian Credit Licence or credit representative number.
• Ask how many lenders are on their panel.
• Ask how they are paid and whether any fees apply.
• Read recent client reviews and ask how they communicate during the process.
• Make sure they explain why a loan suits you, not only what the rate is.

Related Guides

Frequently Asked Questions

This article is general information only and is not financial or credit advice. Speak to a licensed broker about your situation.