Depending on how often you buy and sell homes, settlement will be one of the most significant days of your life.

But what is settlement, why is it significant - and how can you prepare for it so you don't end up in a muddle on the Big Day?

Let's take a look.

What is settlement and why is it important?

Settlement is the legal and financial transfer of a property from the seller to the buyer.

In other words, property buyers will now legally own the home they've spent months searching for.

Property sellers, or vendors, on the other hand, will receive full payment for the home they've finally sold.

In "real" terms, settlement is also the happy ending every buyer and seller longs for after weary, costly months of house-hunting and open inspections.

And thanks to digital platforms such as PEXA, settlement can take less than an hour.

Both buyers and sellers' hard work all come together on this one day - and with smart preparation beforehand, all should run smoothly.

What happens on settlement day?

For property buyers, a smooth settlement day means:

• your lender receives your mortgage deposit
  They will "drawn down" this amount from your bank account, releasing these funds - along with the major amount you're borrowing from them - to your conveyancer
  Your conveyancer will then send the funds to your seller's conveyancer who will forward them to the seller ++
• Your conveyancer or solicitor minuses their own payment from your mortgage deposit funds
• Government fees and charges - including stamp duty and lenders' mortgage insurance (LMI) - are easily transferred to the relevant departments *
  
• significant documents such as the title deeds of your new property are easily organised and transferred *
• you will receive (drum roll....) the keys to your new home

* Btw: your conveyancer will organise all such fees and forms to be sent to the correct people

For property vendors, or sellers, a smooth settlement day means:

• you will swiftly receive payment for your property, with the buyer's lender "drawing down" - or releasing funds - to you on settlement day via your own and the seller's conveyancer ++
  

For both property buyers and sellers, a smooth settlement day means:

• a swift and simple organisation of important documents and forms, such as title deeds *
  
• These details can include:
  + the registration of a mortgage against the title of the buyer's new property - or in basic terms, ensuring the lender's interest in the property is fully detailed on a buyer's new property's title deeds
  + the discharge of a mortgage - when the seller's mortgage which has secured their home loan is removed from the property's title deeds 

Do I have to be present at the settlement?

No, you don't.

In fact, there's a very good chance none of the relevant people such as conveyancers and lenders will actually meet one-on-one on settlement day.

These days, it's all done over the internet including funds transfers.

At the same time, it can be an anxious day for both buyers and sellers - especially if it's your first time doing either.

So ensure you have your phone close by as well as easy access to your emails.

And be prepared to drop everything and move fast if something - especially an issue with funds or forms - goes south.

Ensure you make time within your work hours for such "go south" moments as well as to double-check and sign any final documents and forms.

Settlement day: how to prepare

Unless you're a property investor, settlement day will occur in the midst of moving house - in other words, at an already inconvenient and stressful time.

Prepare for this time though by spending your settlement period (usually 30-90 days) wisely.

The alternative is waiting until settlement day to organise funds and forms - otherwise known as too late.

Buyers - Settlement Day To Do List

• Talk to your lender - several times over if need be - about exactly what they need from you ie proof of you taking out building insurance at your new property
• Triple-check that your mortgage deposit in order, as well as government fees and charges including stamp duty
• Organise to transfer these funds at least five business days before settlement, especially if you're taking out a mortgage with a new lender or bank
  NB: it's a good idea to add some extra dollars to your deposit, just in case
• Talk to your conveyancer - several times over if need be - about exactly what they need from you
• Again, make sure all forms and other details are organised and checked off at least five business days before settlement day
• If you're a property investor, or a potential owner-occupier purchasing a tenanted property, ensure your property manager and the tenant knows of your purchase plans and everything it entails (see below) ++
• This could also be the time to engage a new property manager, or at least investigate this possibility
• Pre-settlement/final property inspection - ensure you make time for this inspection as it allows you to triple-check the property one last time for any issues or problems
  NB: this inspection should be done a few business days before settlement in case something is wrong with the property and settlement has to be delayed
• ++ If the property is tenanted, property buyers - including investors - aren't legally allowed to enter the property for a pre-settlement inspection under RTA legislation, unless the last inspection was done more than three months ago (highly doubtful with the average settlement periods being 30-60 days)
• In this case, all buyers can do is ask the tenant to allow for a final inspection - and doing so as soon as contracts are signed may help. But tenants are within their legal rights to refuse to allow this inspection entry

Sellers - Settlement Day To Do List

• Talk to your conveyancer - several times over if need be - about exactly what they need from you
• Talk to your lender - several times over if need be - about exactly what they need from you
• Keep in touch with your sales agent, and, if your property is tenanted, your property manager to ensure everything - including the buyer and tenant - is in order and everyone knows what's going on
• Ensure your tenant is aware (or remind yourself!) that a final inspection will need to take place a few days before settlement ie the property should be relatively tidy
• Ensure your council rates, water charges, and - if relevant - your body corp fees are in order, remembering that you are responsible for such charges up to settlement
  NB: you will receive a reimbursement, or sales adjustment, to these fees and charges, depending on when the buyer takes ownership of the property ie if your property is due to settle within a quarterly council rates notice period

We're here to help

Buying and selling a home is no easy task and even with the best of mortgage brokers and buyer's agents, it can be a highly stressful process - and that's without the mountains of paperwork!

But we can make life easier for you at this time by finding you the best home loan from more than 40 of Australia’s biggest banks and specialist lenders.

Plus, we can also help you refinance your loan to help you keep more money in your pocket.

So, give us a call today at Lending Loop.