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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.

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home insurance policy signingWhen you apply for a home loan, you need to give your new lender a certificate of currency. It's a document that proves that your property is insured, and helps you avoid suffering the tragedy of losing your home to a fire or other catastrophe before you've even had a chance to move in.

This is a quick guide to explain what it is, how much it costs and how to get it.

But first: 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 current and 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).

When you apply for a home loan, many lenders require you to supply a certificate of currency before you legally own the home. It's usually a condition of the home loan settling, meaning your bank won't settle the purchase and legally allow the sale to finalise until you can demonstrate that you have 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.

What about refinancing?

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.

How do I request a certificate of currency?

To get a certificate of currency, simply contact your insurance provider. Make sure you mention who wants the certificate (the name of your bank or lender) so they can specify it on the document.

You can usually request a certificate of currency from your insurance provider by phoning them directly or by logging in to your personal online account. Or, your insurance broker can request the certificate on your behalf.

Before requesting the certificate for your lender, make sure that your property is insured for the minimum period required by your lender and that the policy commences before the assigned settlement date.

When do I need to provide one?

Typically, your lender will request a certificate of currency during your home loan application process if you are buying an existing property.

You do not need to offer a certificate of currency to your lender if you’re building a home; instead, you would 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.

Does it cost anything?

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.

This is in addition to the actual cost of the policy premium.

Some lenders may provide this document for free, as a self-accessed downloadable PDF through their online portal.

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.

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