What you need to know about the settlement process

When purchasing a home preparation is key and sometimes we need to look to the finishing line to understand there’s a little more to simply handing over the cash and collecting the keys. The settlement process is the final stage of the homebuying journey and while a lot is said about the first steps of saving for a deposit and researching your best property option, you may not be familiar with the final stage, which is just as significant.

But what does the settlement process mean for homebuyers, and how can you better prepare for it?

The stages of the homebuyer journey are typically as follows:

 

  1. Research – choose your home loan lender.
  2. Qualification – boosting your financial situation to improve your chance of approval.
  3. Documentation – gather the documents you need for your loan application.
  4. Application – submit your home loan application.
  5. Pre-approval – you may qualify for pre-approval first and begin shopping for a home.
  6. Lender valuation – you’ve found a property, which will need to be valued by the lender.
  7. Full approval – in some instances, the lender will provide full loan approval at this stage.
  8. Settlement – the legal process of transferring the property to you.

 

Many homebuyers can underestimate the settlement process, expecting it to take less time or that nothing can go wrong with your purchase at this stage. However, this is a common misconception.

If you’re about to enter the settlement period, or looking to purchase a home soon, it’s important you understand just how this stage of the home buying journey works.

Let’s explore everything you need to know about the final stage of the homebuying journey, the settlement process.

 

What is property settlement?

As noted above, settlement of a property is the legal process in which your and the seller’s legal and financial representatives facilitate the transferring of property ownership, as well as pay for the property sale.

Generally speaking, property settlement takes anywhere from 30-90 days or more after your contract of sale is signed. The actual length of time will be agreed upon, including the settlement date, with the seller and detailed in the contract of sale.

In this time, you may complete the following activities with the assistance of a solicitor, conveyancer/settlement agent, or a real estate agent:

  • Conducting a final inspection of the property
  • Finalising and signing the transfer documents
  • Registering the transfer for ownership of the property
  • Purchase home and contents insurance, if desired.
  • Making the final payment for the property, including stamp duty.

It can be a nerve-wracking time waiting throughout the settlement process for your new property. However, as long as you’ve got all your ducks in a row, including up-to-date home loan approval, then things should flow smoothly.

It is not uncommon for technical issues to occur, such as delays in the transferring of funds. As long as both parties are happy to proceed then this may hopefully only delay your settlement by a few business days.

What happens on settlement day?

Put simply, on settlement day you should officially become the legal property owner of your new home.

On the actual settlement day your solicitor or conveyancer will meet with the seller’s representatives, as well as your home loan lender to facilitate the exchanging of documents, including the transfer of the property title into your name, and payment of the property. You may also choose to be present for this process if you’d like, but your representatives can do so without you.

In the lead up to, or on the day of settlement, your solicitor or conveyancer will ensure that all personal and financial documentation – including payment details – are accurate. This includes stamp duty/land transfer duty, as well as applying government assistance from a First Home Owner Grant – if applicable. You may also pay for property costs such as council rates and water rates at this stage.

It is also recommended that you perform a final inspection of the property on or by the settlement day to ensure that it is in the same condition as it was when you signed the contract of sale. In your pre-settlement inspection, be sure to check for factors like:

  • No significant damage to the property has occurred between signing the contract of sale and the settlement day,
  • Fixtures and fittings, such as appliances and plumbing are in working order,
  • All furniture, rubbish and other materials have been removed and the home is in a presentable state.
  • The gardens and green spaces are in the same state (no plants removed)

Then, your solicitor or licensed conveyancer will sign relevant documents as well as the financial settlement schedule on your behalf, which will then be transferred and disbursed.

 

Can you cancel the sale in the settlement process?

It is possible to cancel the sale of a property after the contract of sale, but only during a ‘cooling-off period’. This is a set number of days in which you may pull out of the purchase, and you may need to pay a termination fee, depending on the contract.

In Queensland and New South Wales for example, the cooling-off period for the sale of residential property is five days. For Victoria, the cooling-off period is only 3 business days. And in some instances, there is no cooling-off period if you purchase the property at an auction.

The actual number of days and availability of a cooling-off period will depend on your state or territory, and should be included in your contract of sale, so it’s worth checking this with your solicitor or conveyancer before you proceed.

 

In summary;

  1. The settlement process is the final stage of the homebuying journey.
  2. It is a legal process for transferring property ownership and paying for the property.
  3. A conveyancer or solicitor can do this work for you on your behalf.
  4. Settlement typically takes between 30-90 days.
  5. Buyers may perform a final inspection of the property at this time.
  6. It may be possible to cancel the sale at this time within a cooling-off period.

 

If you’re going through the home buying journey for the first time, you’re not alone. It may be worth reading the Reduce Home Loans First Home Buyer Guide for more information on every stage of this process.

To speak to an expert today for more information on first home loans, consider reaching out to our team at Reduce Home Loans on 1300 733 823.

 

Any statements are general in nature and do not take into account your financial personal situation, objectives or needs. You should consider whether any statement/s is suitable for you and your personal circumstances. Before making any financial decision, consider your circumstances and the product disclosure statement.

 

1300 733 823

(29)    For the Rate Cutter Variable where the borrower pays $1170 upfront fees then a corresponding loyalty discount of 0.10% p.a. off the Rate Cutter Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(27)    For the Investor Rate Slasher Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Slasher Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(26)    For the Low Rider Cash Back Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(25)    For the Economizer Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Economizer Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(24)    For the Super Saver Cash Back Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.10% p.a. off the Super Saver Cash Back Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(23)    For the Super Saver Variable where the borrower pays an upfront fee of $1170 then a corresponding loyalty discount of 0.15% p.a. off the Super Saver Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(22)    For the Economizer Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.11% p.a. off the Economizer Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(21)    For the Investor Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(18)    For the Home Owners Dream 1 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(20)    For the Cash Back Hero Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Cash Back Hero Variable (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(14)   For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(12)   For the Investor Rate Lovers Interest Only where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.07% p.a. off the Investor Rate Lovers Interest Only rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(11)   For the Wealth Maximizer 3 year fixed Principal & Interest where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(10)    For the Wealth Maximizer 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Wealth Maximizer reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(9)    For the Home Owners Dream 3 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(8)    For the Home Owners Dream 2 year fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the Home Owners Dream reverted variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(7)    For the Investor Rate Slasher where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.09% p.a. off the Investor Rate Slasher rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(6)    For the Investor Rate Buster Variable where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.08% p.a. off the Investor Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(5)    For the Rate Buster Variable where the borrower pays an upfront fee of $150 then a corresponding loyalty discount of 0.05% p.a. off the Rate Buster Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(4)For the Rate Slasher Variable where the borrower pays an upfront fee of $1,170 then a corresponding loyalty discount of 0.08% p.a. off the Rate Slasher Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(3) For the Investor Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Investor Rate Lovers Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(2)For the Rate Lovers Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Rate Lovers Variable rate (at that time)  will automatically apply after the 5th anniversary of the loan.  These fees and loyalty discount are factored into the comparison rate.  The loan setup fees are not refundable.

(1) For the Low Rider Variable where the borrower pays $0 upfront fees then a corresponding loyalty discount of 0.06% p.a. off the Low Rider Variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(28) For the Rate Crusher 1 Year Fixed where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.05% p.a. off the Rate Crusher reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.

(19) For the 1 Year Fixed Wealth Maximizer where the borrower pays an upfront fee of $697 then a corresponding loyalty discount of 0.20% p.a. off the 1 Year Fixed Wealth Maximizer reverted variable rate (at that time) will automatically apply after the 5th anniversary of the loan. These fees and loyalty discount are factored into the comparison rate. The loan setup fees are not refundable.