The hard work of finding a property is behind you. Now, all that lies between you and the keys to your new home is the settlement process – a time when your legal and financial representatives get busy preparing paperwork to transfer the ownership of the property from seller to buyer.
You want settlement to run as smoothly as possible because complications can cause costly delays. Depending on your State or Territory (legislation varies), buyers can be charged penalty interest for each day they delay settlement.
Don’t want to have this happen to you? Make a mental note of the 6 biggest mistakes borrowers make during settlement and avoid them at all cost.
1. Signing on top of the ‘sign here’ message flag sticker
Sounds crazy doesn’t it but signing on top of the ‘sign here’ message flag sticker is more common than you think.
While ‘sign here’ flags ensure the borrower doesn’t miss signing any of the pages, they can sometimes get in the way. With a large pile of documents to sign and stress levels running high, you might not notice that you have signed the message flag not the document. Even if just a portion of your signature runs over the flag, the signature will be considered invalid.
2. Witnessing the signature of your loan partner
A witness to a signature must be someone not a party to the loan. When there is more than one borrower on the loan, such as a husband and wife, people sometimes make the mistake of witnessing each other’s signature. Asking children to be a witness is also a no-no unless they are over the age of 18.
3. Not completing a discharge form if refinancing
Borrowers who are refinancing their loan can fail to understand the urgency of completing a discharge form. Some lenders take up to 30 days to complete a discharge, so it’s imperative to lodge this form immediately so it doesn’t slow the settlement process.
4. Failing to check for errors in your insurance policy
The buyer is responsible for the property from the day the seller signs the contract. Taking out a building and contents insurance policy is an important first step in the settlement process.
As with all settlement documents, it’s important to check the details of the policy are correct. Missing errors in the spelling of your name, the security address, the first mortgagee details, and the minimum amount noted on the insurance papers can have serious consequences.
Also, don’t make the mistake of thinking a cover note is enough. Your lender will want to see proof that you have paid the insurance in full.
5. Not having enough funds
Settlement costs include the balance of the sale price, stamp duty, government and bank fees plus any adjustments for council rates, water and utilities. With this long list of costs, there is a danger that you might miscalculate the funds needed.
Sometimes borrowers have the money ready in their account but forget about scheduled bill payments. On settlement day they find a shortfall of funds in their account.
6. Returning documents late
Settlement has many steps so returning documents late can have a domino effect on the whole process. Stick to the necessary timeframes for returning signed documentation to the relevant parties. If you use an express post envelope to transport documentation, be sure to keep the tracker number.
Fortunately, when you work with a professional mortgage broker, you have someone with you every step of the way. Your Yellow Brick Road representative will supply you with a useful checklist and work with you to ensure the documents are correctly signed and delivered.