How Mortgage Advisers Get Paid (and Why It Matters)
- Shane Passfield-Bagley
- Jan 26
- 6 min read
If you’ve ever wondered, “How do mortgage brokers actually get paid?” you’re not alone. It’s a fair question, and it matters, because payment structures can create conflicts of interest.
Here’s the part that often gets missed: a conflict of interest is not automatically a problem. It’s normal in many industries. The real issue is whether it’s identified, disclosed, and managed in a way that protects you.
This article will help you:
Understand the most common conflicts in mortgage advice
See how they can influence recommendations (sometimes subtly)
Learn the green flags that show strong conflict management
Spot the red flags that suggest the advice may be commission-led
What is a conflict of interest?
A conflict of interest is any situation where an adviser’s personal benefit (money, convenience, targets, relationships) could influence the advice they give.
In mortgage advice, the biggest potential conflict is simple:
the adviser can be paid differently depending on which lender you choose.
That doesn’t mean the recommendation is wrong. It means the adviser needs a professional process that ensures your outcome stays the priority.
The most common conflicts mortgage advisers face
1) Commission differences between lenders
Most mortgage advisers are paid via commission from the lender when your loan settles. The amount can vary by lender and product.
How it can influence advice:
Steering clients toward a lender that pays more
Recommending a structure that increases loan size unnecessarily
Avoiding lenders that pay less, even if they fit better
What good looks like: the lender recommendation is clearly linked to your goals, servicing, policy fit, and long-term strategy, not just the rate.
2) Volume incentives, targets, and “preferred lender” pressure
Some advisers and businesses have commercial arrangements that encourage sending business to certain lenders. These can include soft incentives (better support, faster escalation, marketing support) or volume-based benefits.
How it can influence advice:
Over-weighting lenders who are “easier to deal with”
Defaulting to a short list without properly testing others
Presenting fewer options than the market realistically offers
What good looks like: the adviser can explain why the shortlist exists, what was ruled out and why, and what your alternatives would be if priorities change.
3) Clawbacks and “staying put” advice
If you refinance away from a lender too soon, the adviser’s commission may be clawed back by the bank. That can create a conflict if switching genuinely benefits you.
How it can influence advice:
Discouraging refinancing even when it’s sensible
Over-emphasising “wait it out” without doing the numbers
Avoiding honest conversations about break fees versus savings
What good looks like: they show you the maths. Break costs, savings, time-to-breakeven, and a recommendation that still makes sense even if it’s inconvenient.
4) Convenience bias (speed, simplicity, and avoiding hard work)
Not all conflicts are about money. Sometimes the incentive is time and effort. Complex deals take longer: self-employed income, multiple entities, property portability, exceptions, credit issues.
How it can influence advice:
Pushing the quickest lender, not the best lender
Suggesting “reduce the loan amount” instead of solving strategy
Avoiding niche solutions that require more paperwork and advocacy
What good looks like: you feel the adviser doing the work. They gather detail, run scenarios, and explain trade-offs without making you feel like a hassle.
5) Referral relationships (agents, accountants, developers)
Referrals are common, and they can be great. But they can also create pressure to keep the referrer happy.
How it can influence advice:
Encouraging a property choice or timeline that suits someone else
Soft-pedalling risks to keep the deal moving
Avoiding tough conversations because it might slow a sale
What good looks like: the adviser is willing to be the “bad guy” when needed. They prioritise affordability, suitability, and risk, even if it delays a purchase.
How a professional adviser manages conflicts properly
Here are the markers of strong conflict management in plain English:
They disclose, early and clearly
You shouldn’t have to awkwardly ask. A good adviser will proactively explain:
How they’re paid
Whether payment varies by lender
Whether there are any relationships that might influence advice
What steps they take to keep recommendations objective
They use a consistent, documented process
Not just “trust me”. Look for evidence of a method, such as:
Clear fact find and goals discussion
Options compared against your priorities
A written rationale for the recommendation
Notes on why alternatives were not chosen
They can justify the recommendation without leaning on rate alone
The best loan is not always the lowest rate this week. They should talk you through:
Servicing and approval likelihood
Policy fit (income type, deposit, property type)
Flexibility (re-fix strategy, revolving credit, lump sums)
Fees, cashback, and break costs
Future plans (kids, business changes, selling, investing)
They invite scrutiny and questions
They’re not defensive. They encourage you to challenge the thinking.
Examples of Conflicts and How They Can Affect You
Imagine two advisers:
Adviser A works only with one bank and receives a 1% commission on every loan. They recommend a loan from that bank even though another lender offers a lower interest rate and better terms.
Adviser B works with multiple lenders, charges a flat fee, and explains all options clearly. They recommend a loan that fits your budget and long-term goals, even if it means less income for them.
In this example, Adviser B manages conflicts better and is more likely to give you the best mortgage advice.
Questions to Ask Your Mortgage Adviser
Before you commit, ask these questions to understand how your adviser handles conflicts of interest. These are simple, direct, and very telling:
How are you paid, and does it change depending on the lender?
What lenders did you consider for me, and why did you rule others out?
If I chose a different lender, what would be the downside for you (if any)?
Are there any referral relationships involved in this deal?
Can you show me the numbers and trade-offs behind this recommendation?
What happens if we need to refinance in 12–18 months?
A good adviser won’t just answer these. They’ll be glad you asked. Answers that are clear, honest, and client-focused indicate a trustworthy adviser.
What You Can Do to Protect Yourself
Do your own research: Compare loan options online before meeting advisers.
Get multiple opinions: Talk to more than one adviser to see different perspectives.
Read the fine print: Understand fees, interest rates, and loan terms fully.
Check adviser credentials: Look for advisers registered with the Financial Markets Authority (FMA) or other relevant bodies.
Speak with your friends and family: Often a personal referral is a great way to ensure that you are meeting with someone who is trustworthy.
The Role of Regulation in Managing Conflicts of Interest
New Zealand has rules to protect borrowers from conflicts of interest in mortgage advice. Advisers must disclose how they get paid and act honestly and fairly. The Financial Markets Authority (FMA) oversees these rules.
Still, regulation can only do so much. It’s up to you to stay informed and choose advisers who follow both the letter and spirit of the law.
Finding the Best Mortgage Adviser for You
The best mortgage adviser is someone who:
Prioritises your financial wellbeing.
Explains how they get paid and any potential conflicts.
Offers a range of loan options.
Helps you understand the costs and benefits.
Supports you through the entire mortgage process.
Choosing the right adviser can make a big difference in your home buying experience and your financial future.
The bottom line
Mortgage advisers will almost always have some form of conflict of interest. The goal isn’t to find someone with zero conflicts. The goal is to find someone who:
Is upfront about them
Has a strong process to manage them
Can show you the logic and trade-offs
Prioritises your long-term position over short-term convenience
Understanding how mortgage advisers get paid and the conflicts of interest they face helps you make smarter choices. Look for advisers who are open about their fees, offer a wide range of options, and focus on your needs. This approach leads to better mortgage advice and a loan that truly fits your situation.
This article is general information only, not financial advice. Your situation is unique and advice should be personalised.
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