When you get your loan approved by your bank or finance company, you are feeling happy that you can make an offer on the property you want to buy. You put in your offer, have it accepted and then the Contracts are exchanged or become unconditional.
As you move through the home purchase process, you may not have had the time to give thought to the exact amount your bank will advance on the settlement day of your purchase. This is the day when you pass over the funds for the purchase and receive the keys to the property. The amount available at settlement is set out in the loan documents – but you may not have read it carefully, as you may be busy organising removalists and all the other tasks you need to do before moving. Your broker should have explained this to you, but some say they will get back to it and never do.
Once the loan documents are signed and sent back to the bank, the bank sends them on to their solicitors for internal checking. Depending on the bank, this process takes around 10 working days, sometimes more. Once the documents are verified, the bank contacts us to tell us that they are ready to accept a booking.
We then call the bank and book them in for settlement. This is usually a day or two before the settlement day. This is when the bank advises us of the amount available at settlement. We then contact you and let you know the amount available at settlement and any shortfall this leaves in the amount required to pay for the property.
Most clients sign an authority which enables the bank to deduct any shortfall from their savings account. This saves you the hassle of needing to get a bank cheque to the settlement venue in the amount of the shortfall in time for settlement to occur. However, not all banks will offer you the authority to deduct the shortfall amount from your savings account. In that case, we can offer you the use of our Solicitors Trust Account to deposit funds to ensure that settlement can take place as scheduled.
Your bank usually deducts the following fees from the loan amount and this often causes the shortfall: lenders mortgage insurance, settlement agents fee, registration of title and mortgage registration fees, bank cheque fees, and solicitor fees (if the bank used a solicitor to prepare the mortgage documents).
So it’s always good to check with your bank to see what fees will be deducted from your loan amount. That way you won’t get a nasty surprise just before settlement.