When to Start & What to Expect: Refinancing Settlement

How Refinancing Settlement Actually Works

Refinancing settlement is the final stage where your new lender pays out your existing lender and takes over your mortgage. The process typically takes 4-6 weeks from application approval to settlement day, though timing can vary depending on property valuation requirements and lender processing schedules.

The settlement itself happens electronically between lenders and solicitors, with minimal input required from you once the documentation is signed. Your existing lender receives the payout amount, any equity release or cash out component is transferred to your nominated account, and your new loan officially commences. For property owners in Kooyong, where many homes are held in family trusts or have existing offset accounts with substantial balances, the coordination between old and new accounts requires careful timing to avoid losing days of interest or access to funds.

What Happens Between Approval and Settlement

Once your refinance application is formally approved, your new lender issues loan documents and begins coordinating with your existing lender to obtain a payout figure. This payout figure includes your remaining loan balance, any break costs if you're exiting a fixed rate early, discharge fees, and a daily interest calculation up to the proposed settlement date.

Your solicitor or conveyancer reviews the loan documents, arranges for you to sign them, and registers the new mortgage on title. If you're accessing equity as part of the refinance, the amount available for drawdown is confirmed at this stage. In our experience, clients often underestimate how quickly they need to organise final signatures, particularly if they're travelling or coordinating multiple parties on a trust deed.

Fixed Rate Expiry and Refinancing Settlement Timing

If your fixed rate period is ending, the timing of your refinancing settlement becomes critical. Exiting a fixed rate loan even one day early can trigger break costs, which are calculated based on the difference between your fixed rate and the wholesale rate your lender can now obtain for the remaining term.

Consider a property owner refinancing a loan with a fixed rate expiring mid-month. If settlement occurs two weeks before the fixed period ends, break costs might amount to several thousand dollars depending on the loan balance and how much rates have moved since the loan was fixed. If settlement occurs one day after the fixed period expires, there are no break costs, but you'll revert to your existing lender's variable rate for that period. The refinance settlement date needs to align with the expiry date, which requires backward planning from the expiry date rather than simply submitting the application and hoping it lands correctly.

Equity Release and Settlement Day Funding

When you're refinancing to release equity, settlement day includes an additional funding step. The new lender pays out the old lender, then transfers the equity component to your nominated bank account, usually on the same day but sometimes up to 24 hours later depending on the lender's settlement processes.

The equity release amount is the difference between your new loan amount and the payout figure for your old loan, minus any refinancing costs that are being capitalised into the new loan. If you're using released equity to purchase an investment property or fund renovations, the timing of when those funds actually hit your account matters. Some lenders release equity funds immediately at settlement, while others process them as a second transaction later that day. Clarify this with your broker before committing to deposit payments or settlement dates on related transactions.

Discharge and Registration: The Legal Handover

Your existing lender must discharge their mortgage from the property title before the new lender's mortgage can be registered. This process is managed electronically through the land titles office and usually completes within 24-48 hours of settlement, though the actual change of lender occurs on settlement day itself.

During this brief window, both mortgages may appear on title, or neither may appear if you check at the exact moment between discharge and registration. This is a normal part of the electronic settlement process and doesn't affect your legal position or the validity of the new loan. For properties in Kooyong, many of which have long title histories or multiple caveats from family arrangements, the discharge process occasionally reveals outdated encumbrances that need to be cleared before settlement can proceed, which is one reason why engaging a solicitor early in the refinance process is worthwhile.

Costs Involved in Refinancing Settlement

Refinancing settlement involves several costs beyond the interest rate comparison. Discharge fees from your existing lender typically range from $300 to $500, though some lenders waive these fees as a retention gesture if you contact them before proceeding. Solicitor or conveyancer fees for a refinance are generally lower than a purchase settlement, often between $800 and $1,500 depending on complexity.

If your new lender requires a property valuation, this can add another $200 to $600 depending on the property type and location. Some lenders offer to cover valuation costs or provide valuation waivers for low loan-to-value ratio refinances. Government charges for registering the new mortgage and discharging the old mortgage are minimal, usually under $200 combined. When you're refinancing to reduce your rate, these upfront costs need to be weighed against the interest savings over the period you expect to hold the loan.

What You Need to Provide Before Settlement

Before settlement can proceed, you'll need to provide final identification verification, evidence of insurance for the property, and confirmation of your nominated account for any equity drawdown. Most lenders require buildings insurance to be in place before settlement, with the new lender noted as the interested party on the policy.

If you're refinancing an investment property, you may also need to provide a current lease agreement and evidence of rental income. For properties held in a trust or company structure, additional documentation such as trust deeds or company extract certificates may be required if they weren't provided during the application stage. In Kooyong, where many properties are held by high-net-worth families in discretionary trusts, coordinating these documents between accountants, lawyers, and brokers is often the most time-consuming part of the settlement preparation.

Settlement Day: What Actually Happens

On settlement day, your solicitor or conveyancer coordinates with both lenders to execute the financial transfers. The new lender transfers the payout amount to your old lender, your old lender confirms receipt and releases the mortgage discharge, and the new lender registers their mortgage on title.

You don't need to attend settlement or be available during the day, though it's worth being contactable in case any last-minute queries arise. Most settlements occur in the morning, with confirmation provided to you by early afternoon. Your first repayment under the new loan typically begins one month from settlement day, though interest starts accruing immediately. If you're moving from one offset account to another, transfer your funds across on settlement day to avoid losing any offset benefit during the transition.

When Refinancing Settlement Gets Delayed

Settlement delays most commonly occur when property valuations come in below expectation, requiring a loan amount reduction or additional deposit, or when last-minute credit checks reveal changes to your financial position since the application was approved. These issues are usually identified several days before the scheduled settlement date, giving you time to address them.

Less common but more disruptive are delays caused by title issues, such as unresolved caveats or incorrect property descriptions, or by lender processing backlogs during peak periods. If your refinance is time-sensitive because you're exiting a fixed rate or coordinating with another property transaction, build in a buffer of at least one week beyond your target settlement date. We regularly see clients whose fixed rate expiry dates fall in late June or late December, when lender processing times extend due to end-of-financial-year volumes and holiday schedules.

Moving Your Offset and Redraw Balances

If you have an offset account with your current lender, those funds aren't automatically transferred to your new lender. You'll need to manually transfer the balance on or just after settlement day to maintain your offset benefit. Some lenders allow you to set up your new offset account before settlement so you can transfer funds immediately.

Redraw facilities work differently. Any available redraw on your old loan is factored into the payout figure, meaning you're effectively borrowing that amount again under the new loan. If you want to maintain the same net debt position, you'll need to calculate the difference between your old loan balance and your old redraw availability, then ensure your new loan amount matches that net figure rather than the full payout amount. This requires clear communication with your broker before the application is submitted, as changing the loan amount after approval can require a new assessment.

Call one of our team or book an appointment at a time that works for you to discuss your refinancing settlement timeline and ensure every step is coordinated to protect your rate outcome and equity access.

Frequently Asked Questions