Do you know what happens at refinance settlement?

When you refinance your home loan, settlement is the day your old loan ends and your new one begins.

The process involves your new lender paying out your existing loan, registering the new mortgage, and transferring any remaining funds to you if you're accessing equity. Most of the work happens between lenders and solicitors, though you'll need to handle a few tasks in the days leading up to settlement. Understanding what happens and when keeps the process moving and helps you avoid delays that could cost you money.

What actually happens on settlement day

Your new lender sends the loan funds to your existing lender to pay out the balance owing, including any accrued interest and discharge fees. Once the old loan is cleared, the existing lender releases the mortgage over your property, and your new lender registers their security interest with the Queensland Land Titles Office. If you're refinancing to access equity, any leftover funds after the payout are transferred to your nominated account, usually within a few hours of settlement completing.

Consider a homeowner in North Ipswich refinancing a loan balance of $380,000 and accessing $50,000 in equity for renovations. At settlement, the new lender advances $430,000. From that, $380,200 goes to the old lender to cover the loan balance and discharge costs, and $49,800 lands in the homeowner's account by early afternoon. The old loan closes, the new loan activates, and repayments start according to the new loan terms.

Settlement timing and what you need to do beforehand

Settlement usually occurs around 10am on the agreed date, though exact timing depends on when funds are released and processed. A few days before settlement, your new lender will ask you to sign final loan documents, often digitally. You'll also need to arrange building insurance in the new lender's name and provide proof before settlement can proceed. If you're switching lenders, set up your new direct debit or repayment method so your first payment doesn't get missed.

In North Ipswich, where many properties are older Queenslanders or worker's cottages, lenders often require confirmation that insurance is active and covers the replacement value, not just the loan amount. If your policy lapses or doesn't meet the new lender's requirements, settlement can be delayed, sometimes by several days, which means you'll keep paying interest on the old loan while you wait.

Costs that come out at settlement

Your old lender will charge a discharge fee, typically between $300 and $400, which is deducted from the payout amount. Some lenders also apply an administration fee or settlement processing fee. If you're coming off a fixed rate period early, break costs may apply and will be included in the payout figure. Your new lender may charge a settlement fee or application fee, though many brokers can negotiate loan offers where some of these costs are reduced or waived.

If you're consolidating debts as part of the refinance application, those payouts also happen at settlement. The new lender will pay out your car loan, personal loan, or credit cards directly, and those accounts close once the funds clear. Make sure you've provided current payout figures for each debt, as balances change daily with interest accrual.

What happens if settlement is delayed

If something holds up settlement, such as missing insurance documentation or a delay in the old lender processing the discharge, you'll continue paying interest on your existing loan until the issue is resolved. In some cases, the new lender may also charge an extension fee if the delay pushes settlement beyond the rate lock period. If you're relying on equity funds for a time-sensitive purchase or payment, a delay can create cash flow problems.

A North Ipswich refinance that was meant to settle on a Tuesday got delayed because the homeowner's insurance renewal hadn't been updated with the new lender's details. Settlement pushed to Friday, costing three extra days of interest on the old loan at a higher rate. The delay was avoidable, but it required the homeowner to contact their insurer, update the policy, and have the insurer send confirmation directly to the new lender.

After settlement wraps up

Once settlement completes, your old loan account closes and your new loan becomes active. You'll receive a settlement statement from your new lender showing the breakdown of funds, including what went to the old lender, what was paid to other creditors if applicable, and what was deposited to your account. Keep this document, as you'll need it for tax purposes if you've accessed equity for investment or business use.

Your first repayment on the new loan is usually due about a month after settlement. If you've switched from a loan with an offset account to one without, or vice versa, adjust how you manage your cash flow so you're not caught short when the payment comes out. If you've moved to a loan with redraw or offset features, take time to understand how they work so you're using them to your advantage from day one.

Most of the settlement process happens without you being physically present, but the lead-up requires attention. If you're refinancing or thinking about whether it makes sense for your situation, call one of our team or book an appointment at a time that works for you.

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