What happens on settlement day?

What is settlement day and why does it matter?

Settlement day is the day the buyer's home loan funds are released to the seller. This is an important day because it's the day ownership of the property transfers over!

It's not an immediate process, it can take between 30 to 90 days for the loan to settle from the day the contract of sale is signed.

If you're refinancing your home loan, settlement day will happen much faster.

What happens on settlement day for buyers?

For the buyer, settlement day is the day you take ownership of the property. Your solicitor or conveyancer will exchange the relevant documents with your home loan lender on your behalf. The lender will then transfer the funds directly over to the seller of the property. Your solicitor will make sure the new loan is registered against the title of the property.

Other matters will also be finalised on this day, such as charges that need to be split between the buyer and the seller. For example, if council tax has been paid for the year you will need to reimburse for their portion of the year.

Either on settlement day or very shortly before, you'll also be able to do a final inspection of the property you're buying.

Settlement day is also the day you'll need to pay stamp duty. You can usually pick up your keys that day.

What happens on settlement day for sellers?

For the seller, settlement day is the day you receive the funds for your property. This means you can then proceed with your next step, whether that's buying a new property outright or paying off your home loan to take out a new one.

Ownership of the property is no longer yours and passes to the buyer. Your solicitor or conveyancer will arrange the mortgage discharge if there's a loan on the property. They'll also facilitate the transfer of the property title.

How to prepare for settlement day like a pro

Ahead of settlement day there are a few things you'll need to do to prepare.

• Engage with a conveyancer or solicitor to handle the nitty-gritty paperwork.
• Make sure you've got a home loan approval so that the money is ready to be released on settlement day.
• Sign the sales contract with the agreed settlement date.
• Arrange building and contents insurance.
• Carry out final property inspections.

What could go wrong on settlement day?

Hopefully settlement day will pass smoothly. But there are problems that can arise.

• The buyer may find a problem during their final property inspection.
• The lender may not be ready to release the finance.
• Delayed settlement in the seller's next property.

You can get an approved extension to the settlement date. But if you don't, you may face some repercussions:

1. The buyer may end up having to pay penalty interest.
2. A default notice could be issued giving you a time period within which to settle.
3. A rescission notice will formally end the contract.
4. If the buyer cannot settle and the contract is rescinded, the buyer will likely forfeit the deposit.
5. The seller can claim for damages.

What to do after settlement is complete

You can collect your keys on settlement day or any time after. If the timings work out that means you could start moving in on settlement day.

Things to consider once settlement is complete include:

• Have you paid transfer (stamp) duty?
• Do you have the right insurance for your new property?
• Have you arranged all your utility connections?
• Get ready to start making your new home loan repayments!
• Outline when keys can be collected, when moving should occur and what to do next (home insurance, loan repayments, potential refinancing later)
  

  Frequently asked questions about settlement day

  • Do I need to attend settlement day in person?

    Neither buyers or sellers of property need to attend settlement day in person, as long as they have an official representative to meet the lender instead. You should engage a solicitor or conveyancer to be there on your behalf.

  • Can settlement be delayed and what happens if it is?

    Yes, settlement can be delayed for a few reasons. This could be because the buyer finds a problem during the final inspection or because the lender isn't ready to release the finance.

    Delayed settlements elsewhere can also have an impact. Sellers waiting to move into their next property could delay settlement if that next property isn't ready yet.

    You can get an approved extension to the settlement date, but if you don't you may face some repercussions.

    1. The buyer may end up having to pay penalty interest.
    2. A default notice could be issued giving you a time period within which to settle.
    3. A rescission notice will formally end the contract.
    4. If the buyer cannot settle and the contract is rescinded, the buyer will likely forfeit the deposit.
    5. The seller can claim for damages.

  • When do I get the keys after settlement?

    You can pick up the keys to your new property as early as settlement day itself.

  • How long does settlement take in Australia?

    Settlement of a home loan can take between 30 to 90 days from the date the contract of sale is signed.

  • Can I move in on the day of settlement?

    Yes, if you're ready to move in on settlement day and settlement happens early enough in the day for you to move, you can move in straight away!

  • What are the costs involved on settlement day?

    The biggest additional cost that comes on settlement day is the transfer duty (stamp duty). Other costs include certain utility bills and council tax. The seller may have already paid these costs for the year and so the buyer needs to make sure they pay their proportion from the day they take ownership.

  Sources

Written by

Rebecca Pike

Editor, Money

Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio

Rebecca's expertise

Rebecca has written 267 Finder guides across topics including:

• Home loans
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