Refinancing Settlement: The Process and Procedures

Understanding Refinancing Settlement

When you decide to refinance your home loan, the settlement process is the final stage where ownership of your mortgage transfers from your existing lender to your new lender. For homeowners in Moonee Valley considering mortgage refinancing, understanding this procedure can help you prepare adequately and avoid potential delays.

The refinance settlement procedures are different from purchasing a property, as you're not changing ownership of your home – you're simply switching the debt from one financial institution to another. This process typically takes between two to six weeks from application approval to completion, depending on various factors including your financial situation, property valuation requirements, and the responsiveness of all parties involved.

Pre-Settlement Requirements

Before settlement day arrives, several important steps must be completed:

1. Loan approval - Your new lender completes their assessment of your refinance application
2. Property valuation - The lender arranges a valuation to confirm your property's current worth
3. Discharge authority - You sign documentation authorising your existing lender to release their mortgage
4. Settlement booking - Your broker coordinates with both lenders to schedule a settlement date
5. Final checks - All documentation is reviewed to ensure accuracy

During this period, it's important to maintain your existing loan repayments. Missing payments during the refinance process can jeopardise your application and delay settlement.

The Settlement Day Process

On settlement day, the actual transfer of funds occurs between your old and new lenders. This happens electronically through the PEXA (Property Exchange Australia) system, which has replaced traditional paper-based settlements across Australia.

Here's what happens:

• Your new lender advances the loan amount to pay out your existing mortgage
• Any additional funds (if you're releasing equity in your property or accessing a cash out refinance) are transferred to your nominated account
• Your old lender receives the payout amount and releases their mortgage over your property
• Your new lender registers their mortgage on the property title
• Discharge documents are processed to remove your previous lender's interest

What You'll Pay at Settlement

When refinancing, several costs are payable at settlement. Understanding these helps you budget appropriately:

Discharge fees: Your existing lender typically charges between $150 and $400 to release their mortgage. This covers their administrative costs for processing the discharge of mortgage documentation.

Settlement fees: Your new lender may charge settlement or establishment fees, which can range from $0 to $600 depending on the loan product.

Government charges: In most states, there's a registration fee to record the new mortgage on your property title, usually between $100 and $200.

Break costs: If you're coming off fixed rate before your fixed rate period ending naturally, you may incur substantial break costs. These compensate the lender for the interest they'll lose.

Many lenders offer to capitalise these costs into your new loan amount, meaning you don't need to pay them upfront. However, this increases your overall loan amount and the total interest you'll pay over time.

Timing Considerations

The timing of your refinance settlement is particularly important if your fixed rate expiry is approaching. Many Moonee Valley homeowners who are stuck on high rate following the end of their fixed interest rate period can save thousands by refinancing to a lower rate.

Ideally, you should start the refinance process at least two months before your fixed rate period ending. This provides sufficient time to:

• Complete a comprehensive loan health check
• Compare refinance rates across multiple lenders
• Submit your refinance application with all required documentation
• Allow for property valuation and loan assessment
• Schedule settlement before your rate reverts to a variable interest rate

If you're accessing equity for investment purposes or planning to release equity to buy the next property, additional time may be required for more complex assessments.

Documentation Required

Throughout the settlement process, you'll need to provide various documents:

• Proof of identity (driver's licence, passport)
• Recent payslips or tax returns demonstrating income
• Bank statements showing your savings and spending patterns
• Details of existing debts and liabilities
• Insurance documentation (if changing policies)
• Any relevant information about features you want, such as a refinance offset account or refinance redraw facility

Having these documents readily available accelerates the refinance process and reduces potential delays.

After Settlement

Once settlement is complete, several actions occur automatically:

• Your old loan account closes
• Direct debit arrangements with your previous lender cease
• New repayment arrangements commence with your new lender
• You receive confirmation of settlement and your new loan details

It's important to establish your new direct debit arrangements promptly to avoid missing your first repayment. If you've chosen to consolidate into mortgage (combining personal loans or credit cards with your home loan), ensure those accounts are closed properly to avoid ongoing fees.

You should also confirm that any features you requested – such as an offset account or redraw facility – are active and functioning correctly.

Why Settlement Delays Happen

Occasionally, refinance settlement can be delayed. Common reasons include:

• Missing or incomplete documentation
• Unexpected changes to your financial circumstances
• Property valuation coming in lower than expected
• Delays in receiving discharge authority from your existing lender
• Issues with title searches or property ownership records

Working with experienced mortgage brokers in Moonee Valley helps minimise these risks, as they understand the procedures and can identify potential issues before they cause delays.

Making Your Refinance Settlement Smooth

To ensure your refinance settlement proceeds without complications:

• Respond promptly to requests for information or documentation
• Don't make major financial changes during the application period
• Maintain regular contact with your mortgage broker
• Keep making repayments to your existing lender until settlement
• Notify your broker immediately if your circumstances change

Whether you're refinancing to access a lower interest rate, unlock equity, or access improved loan features like an offset account, understanding the settlement procedures helps you prepare adequately.

Professional Guidance Through Settlement

The refinance settlement process involves coordination between multiple parties – your existing lender, new lender, solicitors, and settlement agents. Having a knowledgeable mortgage broker managing this process on your behalf ensures nothing is overlooked.

At Margin Finance, we guide Moonee Valley homeowners through every stage of refinancing, from conducting an initial loan review to coordinating settlement day procedures. Our team handles the communication with lenders, tracks progress, and keeps you informed throughout.

If you're paying too much interest on your current loan, or your fixed rate period is coming to an end, now is the time to explore your options. A loan review can reveal opportunities to reduce loan costs, potentially access a better interest rate, or improve your cashflow through consolidation.

Call one of our team or book an appointment at a time that works for you to discuss your refinancing options and how we can help make your settlement process proceed smoothly.