Understanding the settlement process when buying a home

What is settlement?

Property settlement is a legal process that is facilitated by your legal and financial representatives and those of the seller. It’s when ownership passes from the seller to you, and you pay the balance of the sale price.

The seller sets the settlement date in the contract of sale. As a general rule, property settlement periods are usually 30 to 90 days, but they can be longer or shorter.

If you’re only refinancing a loan from one lender to another, the refinance settlement process is much simpler.

What happens on settlement day?

On settlement day, at an agreed time and place, your settlement agent (solicitor or conveyancer) meets with your lender and the seller’s representatives to exchange documents. They organise for the balance of the purchase price to be paid to the seller.

Your lender will:

• register a mortgage against the title of your new property
• provide the funds to purchase the new property.

Your solicitor or conveyancer checks that:

• any existing mortgage on the title to the vendor is discharged
• any third party or person who has rights over the property (a caveat) is removed
• all clauses on the sales contract are fulfilled
• the transfer of land and mortgage is registered with the title office in your state or territory.

How to prepare for settlement day

Here are a few tips that will help settlement day goes as smoothly as possible. Be prepared and make sure:

• you’ve contacted a solicitor or conveyancer to act as your agent in the settlement process
• the sales contract is signed and dated with the correct settlement date (agreed to by both you and the seller)
• you’ve organised all the money needed to complete the sale (to cover stamp duty, lenders mortgage insurance and other fees and charges)
• you’ve organised building and contents insurance effective from the purchase date
• you’ve had an opportunity to complete a final inspection of the property.

Final inspection

Just before settlement, you’ll have the opportunity to do a final inspection of the property. Often this is done the day before or the morning of the settlement. Contact the agent to arrange this inspection.

The seller must hand over the property in the same condition as when it was sold. When you view the property for the final time you should check:

• appliances, hot water system, heating and cooling are in working order
• structure, walls, light fittings, window and floor coverings are in the same condition as when you first saw the property
• locks, keys and automatic garage door controls are supplied and working.

If you’re buying a new home, make sure all the work is finished and that the appliances are installed and working. You can organise a defects inspection by a building inspector, if you don’t feel confident checking these things yourself.

What happens after settlement?

After settlement, your lender will draw down on your loan. This means that they’ll debit the amount they’ve paid at settlement from your loan account.

You’re then responsible for paying land transfer duty or stamp duty. It’s usually paid on the settlement date. The title to the property won’t be transferred to your name until you have paid this duty.

The seller is responsible for rates and other council fees up to and including the day of settlement, but after this, you’ll need to pay these costs.

Once settlement is completed, you can collect the keys from the agent and take possession of the property. It’s time to move into your new home at last.

We know that the home loan process can be daunting. When the time comes, don’t feel like you have to do it on your own. Call us on 13 78 79, visit your local branch, make an appointment with a mobile banker or, if you’re ready, feel free to apply online.