What happens on home loan settlement day?
Home loan settlement doesn't have to be a scary process.
Settlement day is the day your home ownership ambitions become a reality. It involves a lot of documentation, some complex legal processes and the disbursement of significant sums of money.
All this can seem a bit scary, but understanding what actually happens on settlement day can take some of the mystery out of the process.
What is settlement?
Settlement is the process of transferring ownership of a property from the vendor to the buyer. During this process, your lender will disburse funds to the property's seller. The title will also be transferred.
The guidelines surrounding how to transfer ownership of property vary by state and territory. Settlement can be a complex legal process and is usually handled by legal representatives for both you and the seller.
How can I prepare?
The most important action you can take to prepare for settlement is to enlist the services of a solicitor or conveyancer. These professionals understand the complex processes involved in settlement and can navigate the process for you.
This aside, there are other steps you can take to prepare. You'll want to make preparations for moving. This means scheduling removalists, scheduling the disconnection of services and utilities at your old property and scheduling their connection at your new property.
You'll also need to do a final inspection of the property before settlement. This ensures that the property is vacant, has been left in reasonable condition and that it includes any items included in the contract.
Preparing for settlement also includes setting aside funds to cover costs. Settlement costs include items like title transfer and registration fees, soliciting and conveyancing costs and stamp duty. It can also include any council rates, body corporate or water payments made in advance.
Your solicitor and conveyancer will let you know the total cost of the transaction before settlement. You'll need to have funds in your account to cover any difference between your home loan amount and the total transaction cost.
What happens on the day?
The good news is that you don't actually have to be present for settlement. The entire process takes place between the seller's legal representative and yours.
Prior to settlement, your solicitor or conveyancer will inspect the contract of sale to ensure all the stipulations and clauses have been met by both you and the seller. They will also ensure that the title is clear of any encumbrances and that it describes the correct measurements and boundaries.
On the day of settlement, your legal representative will meet with representatives of the seller and the lender. Your lender will disburse the funds for your home loan to the seller and will register its mortgage over the title of your property.
Your legal representative will then receive the title to the property and register you as its new owner. They will check that the funds for the mortgage on the title have been disbursed, and that there are no third parties with rights to the property.
After this is done, you own your home. You'll be able to coordinate with the agent to pick up the keys and gain access to your new property.
What are the pitfalls?
It's rare that things go wrong on settlement day, but the two major pitfalls are financing problems and missing documentation.
Delayed settlement laws vary from state to state. While vendors have rights to seek compensation for delayed settlement, buyers often don't have the same rights. If settlement is delayed because the vendor's legal representatives are missing paperwork, you'll need to check with your own solicitor to see what, if any, recourse you have.
What do I do after settlement?
After settlement occurs, you can pick up the keys to your new home. A month after settlement, you'll begin making your home loan repayments.
It's important not only to keep on top of your regular home loan repayments, but to conduct periodic health checks to ensure you're still getting a good deal. Every 12 to 18 months you should review your home loan and compare it to other products on offer. If you find you're no longer getting the best deal, it could be time to refinance.
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