Mozo guides

What is home loan settlement, and how does it work?

Family signing the sales contract for home loan settlement.

Homeownership is a major milestone. The journey typically starts with saving for a home loan deposit and ends with having the keys to your new place.

In the process, one of the many boxes you’ll need to tick off is completing your home loan settlement, or the mortgage settlement process. This part of the process hands over the rest of the final sale price and officially makes the property — and the mortgage debt — yours.

But what does the settlement process involve? And how can you make it sail as smoothly as possible?

Here's what you need to know.

How does home loan settlement work?

Infographic on the home loan settlement process timeline: make offer, pay deposit, sign contract, settle.

On settlement day, you take official ownership of a property and hand over the rest of the purchase price. This day comes after you successfully make an offer, pay the deposit, and sign the contract of sale.

The settlement process usually includes registering your home loan against the property you’re buying, which is why it's called home loan (or mortgage) settlement. 

Settlement day is important for you and your home loan lender. On settlement day, your lender:

  • Adds your home loan to the Certificate of Title.
  • Releases the home loan funds to you to purchase the property (usually 80% of the property value) and debits these to your loan account. 

Your solicitor or conveyancer also completes final legal checks to make sure all is in order. For instance, they will check that:

  • The vendor is removed from the Certificate of Title, often via a mortgage discharge.
  • All sales contract terms are met.
  • No other third party has rights over the property (called a caveat).
  • No terms apply to how the land can be used or what can be built on it (called a covenant).
  • No other people who don't own the property can use it (called an easement).
  • The land and mortgage transfer is registered with the lands title office in your Australian state or territory.

The vendor is responsible for all council rates, utilities, and/or strata fees up to the date of settlement. Afterwards, you'll need to pay these as well.

The official settlement date and location is typically pre-negotiated with the property vendor and mentioned in writing, including on the contract of sale. Your settlement date can come between 4-6 weeks after signing and exchanging a contract of sale.

Once settlement happens, however, you are the new property owner.

How to prepare for home loan settlement

Woman excited about home loan settlement preparation and pointing to a window.

Before settlement day, it’s important to do some preparation. The first step is usually signing and dating the sales contract with the correct settlement date, agreed by you and the seller.

Get a solicitor

The first thing to do is make sure you have a conveyancer or solicitor to act on your behalf as agent. This person will file paperwork, make the final purchase, help check the property, and advise you on any delays, legal catches, or compliance matters.

Complete a final inspection

Contact the real estate agent and arrange for your final inspection around the property. This inspection is your opportunity to double check everything is in order. In theory, the property should be in the same condition as it was when you signed the contract of sale.

When doing your final property inspection, make sure to check that:

  • There’s been no significant damage to the property since signing the contract.
  • All appliances, fittings, and other functions such as pipes are working properly.
  • All locks and garage doors are installed and working, including your keys.
  • All furniture has been removed.
  • Any rubbish or building materials have been removed.
  • The house is reasonably clean.
  • The property is free from pests.

If you find an issue during this inspection, you’ll need to let your conveyancer or solicitor know. This could also delay settlement day.

Get your home loan approved and arrange payment funds

Another important task is making sure that your funds are in order and that your home loan is approved. Consider both the legal fees you need to pay and what monetary support you need. 

For example, you may need to arrange:

  • Stamp duty
  • Conveyancing fees.
  • Lending fees, such as loan establishment fees or settlement fees. 
  • Home insurance effective from settlement day.
  • Potential First Home Owner Grants you need to help with home loan or deposit costs.

Remember, if you don’t have everything in order, you run the risk of your settlement being delayed. The last thing you want is to get to the day of settlement and realise you’re short on funds.

What happens on home loan settlement day?

Woman excited about getting her keys in a present on home loan settlement day.

Settlement day is when you take legal ownership of your new property. On this day your conveyancer or solicitor does all the legal and admin tasks for you, such as liaising with your mortgage lender and the vendor’s solicitor.

These days, these days may even be done online. Typically, the buyer and seller do not need to attend the property settlement meeting. In case of any delays, don't make plans to move in directly on settlement day.

Your buyers agent will even make sure that the final payment is made and lodge any paperwork with the lands title registry so you are the new title deed owner.

With that done, you’ll finally get the keys to your new home. Now it's time to move in.

Learn more about the home buying process by checking out Mozo’s home loan resources. You can also start comparing home loans in the table below.

Compare home loans - last updated 28 May 2024

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Maria Gil
Maria Gil
Money writer

Maria has five years of journalism experience and is currently a finance journalist covering home loans and property, personal finance and the currency exchange market. She has also completed her ASIC RG146 (Tier 2).

Evlin DuBose
Evlin DuBose
RG146
Senior Money Writer

Evlin, RG146 Generic Knowledge certified and a UTS Communications graduate, is a leading voice in finance news. As Mozo's go-to writer for RBA and interest rates, her work regularly features in Google's Top Stories and major publications like News.com.au.

* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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