Why you need a certificate of currency for your home loan application
If your lender requests a certificate of currency, you need to request it from your insurer ASAP to avoid delays in settling your home loan.
Key takeaways
- When you apply for a home loan, you need to give your new lender a certificate of currency.
- The certificate of currency is a document that proves that your property is insured so the bank knows its risk of losing money is reduced.
- If you're building a new home or buying an apartment you probably don't need a certificate of currency.
What is a certificate of currency?
A certificate of currency is a document issued by your home insurance provider that confirms your insurance policy is effective and valid.
Usually, your certificate of currency specifies the conditions of the insurance, including the policy type (home only, or home and contents), as well as the premium paid and the policy expiration date (length of cover).
Providing a certificate of currency to your lender is usually a condition of the home loan settling. This means your bank won't settle the loan and legally allow the sale to finalise until you show you've insured your property.
Why does the bank need a certificate of currency?
In a nutshell, to protect the lender in the event that your property is damaged by an unexpected event, such as theft or fire.
It could be the case that the property's seller has insurance over the property until settlement day, at the same time that you have a certificate of currency and insurance over the property during the purchase period. This is totally normal and is a better situation to be in than neither party being insured, if there's an insurance event that requires cover.
Your lender will ask you to identify them as the mortgagee or interested party in the insurance policy, as this protects the lender from unexpected damage or loss to your property. If something happened to your property, and your property was not insured, then the bank could be at risk, so they can be very specific about the policy wording.
"When you refinance, your new lender will request a copy of your insurance policy with them named as the interested party. I refinanced at the end of 2021 and when I updated my policy with my insurer, the document came back with the wording 'XYZ Limited'. My new lender rejected it, and I had to request another copy with the wording 'XYZ Bank Limited'. This is how picky the banks will be, but it's important - as they need to protect their risks."
When do I need to provide a certificate of currency?
If you're buying an existing property your lender will request a certificate of currency during your home loan application process.
You don't need to offer a certificate of currency to your lender if you’re building a home. Instead, you'd put forward builder’s insurance. The bank will request the builder’s insurance before releasing the first instalment payment.
Additionally, lenders don’t need a certificate of currency for a unit or apartment, as the insurance is covered by strata.
How much does a certificate of currency cost?
When you request a certificate of currency, insurance providers and brokers may charge a nominal fee.
This fee covers the cost associated with preparing the paperwork and will generally cost you around $45-$55, but can cost more if you need it urgently.
This is in addition to the actual cost of the policy premium.
Some providers may offer this document for free, as a self-accessed downloadable PDF through their online portal.
The cost of home insurance premiums rose by 26.4% in the 2 years to 2024. The average cost increased from $1,615.60 a year to $2,207.57 a year.
Source:
Finder database
What should be included in the certificate of currency?
The certificate of currency generally states that the insurance contract is effective up to a given date. You want these details to be accurate as they become very important if an insurable event happens:
- Insured party details. Name/s and residential address of the insured party (the borrower/s).
- Policy details. Insurance policy number and the date that the contract expires.
- Limit to protection. It should specify the maximum monetary amount that the policy covers.
- Premium paid. The amount of premium that has been paid by the insured party, as well as the date and method of payment.
Frequently asked questions about the certificate of currency
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