06 Dec 2018

What You Need to Know About Home Loan Settlement

Home Loan Settlement

It’s common knowledge that the last hurdle of finalising a home loan is called settlement, but what is it really, and what is involved?

What is home loan settlement?

Also referred to as ‘closing’, settlement is the process of legally transferring ownership of property from seller to buyer, or completing the sale. This includes:

  • Paying the agreed sale price
  • Exchanging keys on the property (if required)
  • Exchanging relevant paperwork (if required)

Settlement is the gateway to achieving your home loan goals, be it to refinance your home loan to a lower rate with better features, or to purchase your dream home or investment property.

When purchasing a property with a home loan, the sale amount will be paid to the property sellers. In the case of refinancing a home loan, this is the date your new lender pays the balance to your previous lender, and your new home loan gets settled.

What to prepare prior to settlement day

The settlement process starts typically 30-90 days before the agreed settlement date, which marks the end of the process and the successful ‘settling of business’. The space between the agreement of sale and settlement gives sufficient time for your legal representatives to conduct property inspections, background checks on the property, and to check all contract of sale clauses are being adhered to by both parties. They will also get all documents necessary to close to the sale prepared.

What you will need to do prior to settlement is:

  • Hire the help of a solicitor or conveyancer: With complex legal processes involved and laws changing per state, it is recommended you seek the help of a reputable conveyancer or solicitor to ensure a smooth and stress-free settlement process.
  • Take out building and contents insurance: Ideally this should start on the day of settlement, as this is when you are legally responsible for the property.
  • Carry out a final property inspection: Ensure the property has been left in the same condition it was when you agreed to the sale, and that it includes everything listed in your contract of sale. Be thorough! Check heating and cooling systems, water, windows and doors, locks, keys, and anything else that may be necessary.
  • If you are exchanging keys on a new property, prepare to move! Once settlement is finalised, your property is yours! Whether you’re moving in or plan on renting it out, there will be things you can prepare for ahead of time to make the process smoother, like packing or choosing paint colours and furniture.

What happens during settlement?

While the day will be marked out in your diary, you don’t need to be present for settlement to take place. Your legal representative will deal with all matters relating to settlement with the legal representatives of the seller and lender. These will include (but are not limited to):

  • Registering the mortgage over the title of your property
  • Receiving the title to the new property and registering you as owner (if required)
  • Completing and signing paperwork such as the Transfer of Land (which includes the deed to the property amongst other important documents)
  • Paying fees, like Stamp Duty for example
  • Officially noting settlement in writing

What happens after settlement?

When your keys are released, the property is yours! If you are refinancing and not buying property, then once settled, your home loan payments will change according to your new home loan.

Shortly after settlement, you will receive your final settlement statement.

One month (or fortnight, depending on your payment frequency) after settlement, you will make your first mortgage payment to start paying off your property.

4-6 weeks after settlement, your legal representative will ensure that the title of your new property is in your name and that all details are correct.

And that’s it! We’ll help you at every step of the application process, through settlement, and beyond into paying off your home loan with money-saving features. Contact your Mortgage House Lending Specialist on 133 144 if you have any questions regarding your settlement process.

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