Buying a home is a big decision, and the process of property settlement can be daunting. Often, the settlement day stresses buyers out. It’s the day when the ownership of the property is transferred from the seller to the buyer. So you should’ve performed due diligence and made all the necessary preparations before this important day. Simply put, the period before settlement day—also known as pre-settlement—is crucial.
You have many tasks to do throughout the settlement period, which may take 30 to 90 days after you and the seller have exchanged contracts. It’s the time allotted for you to carry out a house pre-settlement inspection checklist to see whether fixtures or the hot water system need to be repaired or replaced. That way, you can negotiate these repair costs on settlement day. The home loan is another crucial thing to work on during the settlement period. After settlement, your lender will debit the agreed purchase price from your home loan account. So before settlement day, it is important to understand your lender’s requirements and be aware of any potential pitfalls. To help you out, here are five questions you need to ask your lender before settlement.
1. What Are the Home Loan Fees and Charges?
Be sure to ask your lender about all of their fees and charges before signing up. This includes the interest rate, establishment fees, ongoing service fees, early repayment fees, and other potential charges. It’s important to know exactly how much the loan will cost you in the long run before signing the contract of sale on the settlement date.
2. What Is the Repayment Process?
Before settling the final payment on the sale contract, you’ll also need to know how you’ll be repaying your loan. Ask your lender about the repayment process, including the frequency of payments and the length of time you have to pay back the loan.
3. What Is the Loan Term?
You don’t want the settlement process to end without asking about the loan term. The loan term is the length of time you have to repay the loan. It is vital because it affects how much you will pay in interest over the life of the loan. A shorter loan term means you will pay less in interest, while a longer loan term means you will pay more interest.
When considering a loan, make sure to ask your lender about the loan term and make sure it fits your needs. You don’t want to end up with a loan with a longer term than you need because you will likely pay more interest.
4. What Are the Security Requirements?
As you begin securing a loan before property settlement, your lender will likely require security. It can come in the form of collateral—an asset the lending company can seize if you default on your loan. Collateral can be something like a car or a house. If you fail to repay your loan, the lender can take your collateral and sell it to recover their losses.
Another form of security is a co–signer. A co–signer is someone who agrees to be responsible for the loan if you default. The co–signer is usually a family member or close friend who has good credit and is financially stable.
Before agreeing to any security for a loan, make sure you understand the terms and conditions. If you default on your loan, you could lose your collateral or put the credit of your co-signer at risk. Be sure you can make your loan payments on time before you agree to any security.
5. What Is the Loan Process?
Ask your lender about the loan process and how long it will take to get it approved and disbursed. Knowing the timeline upfront will help you plan your tasks throughout the property settlement period. It will make it easier for you to coordinate with your real estate agent about the final inspection & other related tasks.
Reach Out to Us Today
These are just a few of the questions you should ask your lender before property settlement in Australia. You want to get all the answers before the transfer of ownership is registered or before paying land transfer duty, stamp duty & other associated charges.
So be sure to do your research and ask plenty of questions so you can make an informed decision. If you need more guidance, don’t hesitate to reach out to us.
Wealthy You is an Australian mortgage company composed of the best mortgage brokers in Sydney. Our team also comprises legal and financial representatives who have been in the industry for almost a decade. If you want to know more, contact us for an obligation-free meeting!
