How does a mortgage broker get paid in NZ?

Eligible borrowers hire mortgage brokers to help them find the best home loans and to assist them in the entire mortgage process. Clients need the expertise of these professionals due to the amount of money involved in buying a house. 

This makes a mortgage broker’s job both rewarding and lucrative. You will get to help people achieve their homeownership dream while enjoying a career that has a high earning potential. 

In this article, NZ Adviser answers the question: how does a mortgage broker get paid? We will explore five payment methods so that you can manage your expectations. We will also talk about how much you can earn and how mortgage lenders set commission rates for mortgage brokers. 

How much do mortgage brokers make in NZ? 

Mortgage brokers primarily earn their income through commissions paid by mortgage lenders. These can be traditional banks, credit unions, and other financial institutions. You can expect to receive your earnings once you successfully close a mortgage deal. 

As a mortgage broker, you can earn money through these payment methods: 

1. upfront commission  
2. trail commission  
3. client fees 
4. tiered commissions 
5. flat rate 

Let’s take a closer look at these: 

1. Upfront commission 

The primary source of income for mortgage brokers is an upfront commission paid by the bank or mortgage lender when a mortgage is settled. This commission is usually a percentage of the total loan amount, typically ranging between 0.50% and 0.85% of the loan value. 

Mortgage lenders offer different commission rates, and some may provide higher incentives for certain types of home loans. 

2. Trail commission 

There are mortgage lenders that pay mortgage brokers with ongoing trail commissions. This payment method is a smaller percentage of the remaining loan balance. For instance, you can earn a trail commission of 0.15% per year from a successful mortgage transaction. 

A trail commission provides mortgage brokers with a continuous income stream as long as their client maintains their mortgage with the bank or mortgage lender. However, not all lenders offer trail commissions. 

3. Client fees 

Most mortgage brokers in NZ do not charge their clients because they already earn from commissions given by their employer-lenders. However, mortgage brokers may charge a one-off fee in certain cases. The price will depend on the work involved and your discussion with the client. 

Here are some examples of situations where mortgage brokers may charge a client fee: 

• when applying for complex and customised mortgages 
• when applying for mortgages with low loan-to-value (LTV) ratio 
• if a client wants a mortgage lender that does not pay commission 

4. Tiered commissions 

A tiered commission is a payment method where lending companies will allow you to earn different commission rates based on specific performance metrics. This can also depend on certain loan volume thresholds or the number of mortgage deals that you close. 

Some mortgage lenders offer higher commission percentages if you reach a specific target within a given period. This can be on a monthly, quarterly, or annual basis. 

5. Flat rate 

Mortgage lenders can also set a fixed commission rate that a mortgage broker earns for every case that they settle. This is called a flat rate commission or flat fee. Regardless of the loan amount, type, or volume, you can expect to get the same commission percentage on every mortgage deal that you close. 

For example, if your lender-employer offers a flat commission at 0.65%, you will get 0.65% of the loan amount whether it is a $500,000 loan or a $1 million loan. 

Clawback clauses 

If a borrower refinances within a specific timeframe, the mortgage broker may have to repay part or all of their commission. This is known as a clawback and is designed to discourage mortgage brokers from advising their clients to do frequent refinancing. 

The same is true if a client repays or moves their mortgage to another mortgage provider. The timeframe is often within 12 to 24 months. 

How much do mortgage brokers get paid in NZ? 

The average salary for a mortgage broker in NZ is $68,000 per year. Seasoned mortgage brokers can charge higher commissions especially if they are backed by experience and achievements. This additional income could be up to $90,238, bringing the total income to $157,738 per year. 

As for the lowest possible salary, you can earn a base income of $50,000 per year. Experienced mortgage brokers can enjoy the upper end of the income range at $85,420 annually. 

All salary figures used in this article are sourced from Glassdoor. 

How mortgage lenders set commission rates for mortgage brokers 

In NZ, mortgage lenders typically set commission rates for mortgage brokers based on several factors such as: 

1. in-house policies 
2. mortgage type 
3. loan amount 
4. mortgage broker performance 
5. market competition 
6. regulatory factors 
7. agreement through negotiation 

Let us discuss these factors one by one: 

1. In-house policies 

All mortgage lenders have their own commission structure. This can vary based on their business model and target market. 

For example, there are some commercial banks and lending companies that offer flat rates. Other lenders may provide tiered commissions based on the volume of successful mortgage applications that a mortgage broker brings in. 

2. Mortgage type 

Mortgage lenders can set different commission rates for mortgage brokers based on various types of mortgage products that they offer. For instance, their residential home loan might not have the same commission rate as their commercial mortgage or Buy to Let mortgage. 

High-risk loans or specialised mortgage products might also have different commission structures. 

3. Loan amount 

Commission rates can be influenced by the total loan amount. Higher loan amounts may yield higher commissions, either as a flat fee or a percentage of the loan. 

4. Mortgage broker performance 

Mortgage lenders can choose to offer higher commissions to mortgage brokers who consistently perform well or reach specific targets. Performance metrics can include: 

• the number of home loans settled 
• loan volume 
• client retention rates 

5. Market competition 

The local market competition can also impact commission rates. To attract more mortgage brokers, lending institutions might adjust their commissions to be more appealing. Feedback from mortgage brokers and market trends can also influence how a mortgage lender sets their commission rates. 

6. Regulatory factors 

Compliance with regulatory standards can affect commission structures. Mortgage lenders must be sure that their commission practices are transparent and fair. They must also adhere to regulations set by the local agencies. 

7. Agreement through negotiation 

Experienced mortgage brokers may negotiate commission rates with the lenders they work with. This is especially true if they have a strong track record and achievements. 

Understanding the role of a mortgage broker in NZ 

The role of a mortgage broker is important before, during, and after a mortgage transaction. During the initial phase, when homebuyers are researching mortgage products, you need to market your brand to your prospects. 

If a client hires you as a mortgage broker, your main job is to research the mortgage market and find the most suitable home loan products. These mortgage options will come from the lender, so be sure that you’re knowledgeable about their product range. 

Expect that your clients will ask for advice when choosing the most ideal option for their personal goals and financial situation. You will also help them structure their loans and calculate repayments. 

Aside from these major tasks, you will be responsible for: 

• applying (on behalf of clients) for a home loan with the mortgage lender of their choice 
• submitting client documents and tracking their mortgage loan applications 
• assisting clients with their real estate insurance appraisals 

Want to learn more about what mortgage brokers or advisers can do for their clients? Watch this video: 

Top-performing mortgage brokers can efficiently manage their role and perform their tasks well. Check out our report on the 25 best mortgage brokers in New Zealand and see why they stand out. 

How many mortgage brokers are there in NZ? 

Currently, there is no available data on the number of mortgage brokers in NZ. In 2018, there were more than 1,500. We can assume that that number may have increased over the past few years.   

Starting your journey as a mortgage broker in NZ 

During your first month as a mortgage broker in the country, you can expect to go through the onboarding process just like any other professional. 

Use the first few weeks to learn about your employer-lender's home loan options so you can answer questions from clients. It's also a good opportunity to explore the local mortgage market where you plan to work. 

Make sure you communicate with your colleagues and other mortgage brokers. Try to be open whenever you are given advice and guidance. 

If you want to get inspiration and learn a few essential tips, you can go to our special report on the best mortgage advisers in New Zealand. They might also provide better strategies that mortgage brokers and advisers can use. 

Working with a mortgage aggregator 

If you join a bank or mortgage lender, you will be included in their existing agreement with a mortgage aggregator group. A mortgage aggregator facilitates relationships between mortgage lenders and mortgage brokers. 

Generally, the largest banks and mortgage providers in NZ do not speak directly to their brokerage representatives. Instead, they have agreements with a number of mortgage aggregator groups. Your employer-lender can assign you a mentor to guide you through the day-to-day work activities. 

How long does it take to become a mortgage broker in NZ? 

The entire process of becoming a mortgage broker can take anywhere from 4 weeks to 6 months. This will depend on your level of experience and qualifications. Your willingness to meet all the requirements as quickly as possible can be a huge factor. 

This period can also depend on the processes of the specific agencies involved. For example, the denial of your application for a mortgage broker licence could cause an unwanted delay. To avoid this, make sure you are eligible to apply for faster approval. 

Another example is employment by a bank or mortgage lender, as this is part of the process of becoming a mortgage broker in the country. The decision to hire is largely up to the mortgage provider. Getting rejected can cause the process to take longer. 

Go for lending institutions that are well-established. Choose those that are known for employing new mortgage brokers without being complicated about their hiring procedures. You can also check out this report on the best mortgage companies to work for in New Zealand. 

Read next: How to become a mortgage broker in New Zealand

Preparing to work as a mortgage broker 

When preparing to work as a mortgage broker, it is necessary to familiarise yourself with the local market and your employer-lender's mortgage offerings. You should also keep in mind that complying with the rules and regulations is a must. 

Try to work with a client-centric approach. Understanding your clients' concerns and financial situation will allow you to provide advice and solutions that are tailored to their mortgage needs. 

Overall, your dedication to providing excellent service will set you apart in NZ’s mortgage broking industry. Your success as a mortgage broker can have a positive impact on the lives of those looking to secure a home. 

What do you think about the various ways a mortgage broker gets paid in NZ? Tell us in the comments section below.