Smart Ways to Approach Refinancing Settlement

What Happens Between Approval and Settlement When You Refinance

Once your new lender approves your refinance application, settlement typically occurs within four to six weeks. During this period, your new lender prepares loan documents, orders a property valuation if required, conducts final credit checks, and coordinates with your existing lender to arrange payout figures and discharge of the current mortgage.

Consider a buyer who refinanced a unit in Cronulla after their fixed rate expired. The new lender approved the loan in three days, but settlement took five weeks because the existing lender was slow to provide the payout figure and the borrower's bank statements needed updating. The delay pushed settlement past the end of the month, meaning an extra month of interest at the old rate, costing around $380 in this scenario. The borrower had assumed approval meant the lower rate would start immediately.

The gap between approval and settlement exists because multiple parties need to complete tasks in sequence. Your new lender sends loan documents to your solicitor or conveyancer, who reviews them and arranges for you to sign. Once signed, the documents return to the lender, who books a settlement date with your existing lender. Your existing lender calculates the exact payout amount, including accrued interest up to settlement day. On settlement day, your new lender pays out the old loan, and the old lender discharges the mortgage from the property title.

How Your Existing Lender Calculates the Payout Figure

The payout figure includes your remaining loan balance, accrued interest up to the settlement date, any discharge fees, and break costs if you are exiting a fixed rate early. Your existing lender typically provides this figure with a validity period of 30 days, after which it needs recalculating due to additional interest accrual.

Break costs apply when you exit a fixed rate before the term ends. The calculation compares the interest rate on your fixed loan with the rate your lender can earn by lending that money elsewhere for the remaining fixed period. If rates have dropped since you fixed, the lender charges you the difference because they lose income. If rates have risen, break costs are usually zero. For a $600,000 loan with two years remaining on a fixed rate, break costs can range from nothing to $15,000 or more depending on how much rates have moved. If you are coming off a fixed rate naturally at the end of the term, break costs do not apply.

Your existing lender sends the payout figure to your new lender or your solicitor, depending on who requested it. Any delay in receiving this figure pushes back settlement. Some lenders provide payout figures within 48 hours, others take up to two weeks. If your existing lender is slow, your broker can escalate the request, but the timeline is largely outside your control.

What Your Solicitor or Conveyancer Does During Settlement

Your solicitor or conveyancer reviews the loan documents from your new lender, ensures the loan amount and terms match what you agreed to, arranges for you to sign the mortgage documents, and lodges the discharge of your old mortgage and registration of your new mortgage with the land titles office.

You can use your own solicitor or one recommended by your broker. Costs typically range from $800 to $1,500 plus disbursements for a straightforward refinance. The solicitor does not coordinate settlement day itself, that task falls to the lenders, but they ensure all documents are correct and lodged properly. If you are refinancing an investment property and also accessing equity to fund a deposit on another purchase, your solicitor needs to coordinate timing across both transactions, which adds complexity.

Documents You Need to Provide Before Settlement

Your new lender will request updated bank statements, payslips, and proof of any changes to your financial situation between approval and settlement. They conduct a final credit check within a few days of settlement to ensure no new debts have appeared since approval.

If you take out a car loan, apply for a credit card, or change jobs between approval and settlement, your refinance can be delayed or declined. Lenders want confirmation that your financial position has not deteriorated. In our experience, borrowers who assume approval means they can relax often create problems by making financial commitments before settlement occurs. Keep your financial situation stable until the refinance completes.

Your lender may also request an updated property valuation if more than 90 days have passed since the initial valuation or if the property market has shifted noticeably. This can delay settlement by one to two weeks and may affect your loan amount if the valuation comes in lower than expected.

What Happens on Settlement Day

Settlement usually occurs electronically between 10am and 2pm on the agreed date. Your new lender transfers funds to your existing lender to pay out the old loan, and your existing lender confirms receipt and releases the mortgage over your property. Your solicitor lodges the discharge with the land titles office, which can take a few days to process.

You do not need to attend settlement or take any action on the day itself. Your new loan account becomes active, and interest starts accruing at the new rate from settlement day. If you have an offset account as part of the new loan, transfer funds into it immediately to reduce interest charges. Your first repayment on the new loan is usually due around 30 days after settlement.

If something goes wrong on settlement day, such as insufficient funds from the new lender or a last-minute issue with the payout figure, settlement is postponed. This is uncommon but does happen. Your broker can usually resolve the issue within 24 to 48 hours, but you continue paying interest on the old loan until settlement completes.

How Long After Settlement Until the Old Loan Closes

Your old loan account typically closes within five to ten business days after settlement. Your previous lender may send a final statement showing a zero balance and confirming the mortgage discharge has been lodged. If you had an offset or redraw account linked to the old loan, transfer any remaining funds before closure.

Some lenders hold funds in the offset or redraw account for a short period after settlement to ensure no outstanding fees or adjustments. If you had direct debits or regular transfers linked to the old loan account, redirect them to your new loan or offset account to avoid failed payments. Your broker can provide a checklist of tasks to complete after settlement, but these are your responsibility to action.

When Refinancing Does Not Proceed to Settlement

A refinance can fall over between approval and settlement if your financial situation changes, the property valuation comes in too low, or your existing lender reveals a hold or restriction on the title that was not disclosed earlier. Your new lender can also withdraw approval if their final credit check shows new debts or missed payments.

If the refinance does not proceed, you remain with your existing lender on your current loan terms. You do not lose money beyond any costs already incurred, such as solicitor fees for reviewing documents or valuation fees paid upfront. Some lenders charge application fees that are non-refundable, but many do not charge anything if the loan does not settle. Check your fee schedule before starting the refinance process.

Moving Between Lenders Without Disrupting Your Offset or Redraw Balance

If you have a large offset balance or available redraw with your current lender, you might hesitate to refinance because you do not want to lose access to those funds during the transition. Your offset balance transfers to the new loan on settlement day if the new loan includes an offset account. You can transfer funds electronically once the new account is active, which usually happens within a few hours of settlement.

Redraw balances are different. If you have paid ahead on your current loan and built up redraw, that amount reduces your payout figure when you refinance. You are effectively cashing out the redraw balance and using it to reduce what you owe. If you want to maintain access to those funds, ensure your new loan includes redraw or an offset account with sufficient limit. Your broker can structure the loan amount and offset to preserve your cashflow flexibility.

Call one of our team or book an appointment at a time that works for you. We coordinate the entire refinancing settlement process and liaise with your solicitor, your existing lender, and your new lender to keep the timeline on course and avoid delays that cost you money.

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