What Happens During Refinance Settlement
Settlement is the legal process where your new lender pays out your existing loan and registers the new mortgage over your property. It typically occurs 4 to 6 weeks after your refinance application is approved, though timelines vary depending on your lender's processes and whether any unusual conditions need to be met.
The process involves your new lender's solicitor, your existing lender, and the land titles office in your state. You don't attend settlement yourself. Your mortgage broker and the lenders coordinate everything, but you'll need to complete several tasks beforehand to ensure settlement proceeds on the scheduled date.
Documents You'll Sign Before Settlement
Once your loan is formally approved, your new lender will send you a loan contract and mortgage documents to sign. These documents set out your loan amount, interest rate type (whether variable or fixed), repayment obligations, and the security property details. Read these carefully because they're binding once settlement occurs.
You'll also receive a settlement statement showing exactly how much your new lender will advance, what portion pays out your existing mortgage, any costs being deducted, and what funds (if any) will be released to you. Consider a borrower refinancing to access equity: if their old loan balance is $380,000 and they're refinancing for $450,000, the settlement statement would show $380,000 going to the old lender, approximately $2,000 in discharge and registration fees, and around $68,000 being transferred to their nominated account after settlement.
Most lenders now offer electronic signing through DocuSign or similar platforms. Return signed documents promptly because delays here can push back your settlement date, and if your fixed rate period is ending, you might roll onto a higher variable rate in the meantime.
Discharge Authority and Payout Figures
Your new lender will request a payout figure from your current lender, which includes your outstanding loan balance plus any accrued interest up to the settlement date. If you're on a fixed rate loan and refinancing before the fixed period ends, this payout figure will also include break costs. These can be substantial, sometimes running into thousands of dollars, so confirm this amount before proceeding if you're coming off a fixed term early.
You'll need to sign a discharge authority form allowing your existing lender to release their mortgage over your property. Without this signed authority, your old lender won't cooperate with settlement. Some lenders charge a discharge fee, typically between $300 and $500, which gets added to your final payout amount.
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How Settlement Day Works
On settlement day, funds transfer electronically between financial institutions. Your new lender sends the payout amount to your existing lender, and your old lender confirms receipt and releases their mortgage. The new lender then registers their mortgage with the relevant land titles office in your state.
Settlement usually occurs in the morning, but you won't have access to any equity release funds until later that day or sometimes the following business day, depending on banking processing times. If you're refinancing to consolidate debt or fund renovations, don't schedule payments or purchases for settlement day itself. Allow at least one business day buffer.
In our experience, most settlement delays happen because borrowers haven't updated their insurance or provided final bank statements showing their savings position hasn't changed since approval. Check with your broker two days before settlement to confirm everything is on track.
What You Pay on Settlement
Refinancing involves several costs that either get deducted from your loan advance or paid separately. Registration fees and government charges vary by state but typically range from $400 to $600. Your old lender's discharge fee gets added to your payout balance. If you're using a solicitor rather than the lender's in-house legal team, expect conveyancing fees between $800 and $1,500.
Some lenders charge an establishment fee or application fee, though many have removed these in recent years. If your loan includes an offset account or redraw facility, there might be a package fee, typically around $395 annually. Valuation costs (usually $200 to $300) are sometimes charged upfront during the application stage, while other lenders absorb this cost.
Lender's Mortgage Insurance doesn't usually apply when refinancing if you're not increasing your loan size relative to your property value. If you're accessing equity and your loan-to-value ratio goes above 80%, LMI will apply and can add thousands to your costs.
After Settlement: First Payment and Account Setup
Your first mortgage payment will be due approximately one month after settlement. The exact date depends on your loan contract terms. Most lenders calculate interest daily and charge it monthly in arrears, meaning your first payment covers the interest that accrued during the previous month.
You'll receive online banking access within a few days of settlement. Set up your regular repayment from your transaction account immediately to avoid missing that first payment. If you've refinanced to access equity, keep those funds separate from your offset account if you want to maintain a clear audit trail for tax purposes, particularly if you're using the equity for investment purposes.
Confirm that any automatic payments linked to your old loan have been cancelled. In some cases, borrowers have had their old lender attempt to process a scheduled payment even after the loan was discharged, creating unnecessary complications.
When Your Old Loan Doesn't Discharge Immediately
Occasionally, an existing lender will delay releasing their mortgage even after receiving full payout. This typically happens when there's a discrepancy in the payout amount or if paperwork is incomplete. Your broker and new lender will follow up, but if the delay extends beyond a few days, you might be paying interest to both lenders temporarily.
If this happens, keep detailed records. Once resolved, you can usually claim back any duplicate interest charged. It's uncommon but worth understanding, particularly if you're refinancing a loan that had multiple parties involved, such as a loan with a guarantor whose consent is required for discharge.
Switching Lenders vs Internal Refinance
Some borrowers assume they need to switch lenders to access a lower rate, but internal refinancing (switching loan products with your current lender) can sometimes achieve similar outcomes with less paperwork. However, settlement procedures differ because there's no discharge involved. Your existing lender simply closes your old loan account and opens a new one.
Internal refinancing typically settles faster, often within 2 to 3 weeks. You'll avoid discharge fees and registration costs, but you won't trigger competition between lenders, which often means you miss out on rates and cashback offers available to new customers. A loan health check can clarify whether staying with your current lender or switching will genuinely improve your position.
Preparing Your Property Insurance
Your new lender requires proof that your property is insured for at least the rebuild value before they'll settle. If you already have insurance, you'll need to provide a certificate of currency showing your new lender as the interested party. If your policy is about to expire, renew it before settlement rather than waiting.
Some lenders accept insurance arranged at settlement, but this creates unnecessary risk. If something delays your insurance setup, your settlement will be postponed. Get this sorted at least one week before the scheduled settlement date. Your insurance broker can usually update the interested party details within a day once you provide your new lender's information.
Call one of our team or book an appointment at a time that works for you if you'd like to understand exactly what your refinance settlement will involve or if you're considering whether to refinance your home loan and want to confirm potential savings after all costs are accounted for.
Frequently Asked Questions
How long does refinance settlement take?
Settlement typically occurs 4 to 6 weeks after your loan is approved. The exact timeline depends on how quickly you return signed documents, whether your existing lender processes the discharge promptly, and if any unusual conditions need to be met before your new lender will fund the loan.
What costs do I pay when settling a refinance?
You'll typically pay registration fees ($400 to $600 depending on your state), your old lender's discharge fee ($300 to $500), and potentially solicitor fees if not using the lender's in-house team. Some lenders charge application or establishment fees, though many have removed these in recent years.
Do I attend settlement when refinancing?
You don't attend settlement yourself when refinancing. The process is handled between your new lender's solicitor, your existing lender, and the land titles office. You'll sign documents beforehand, and funds transfer electronically on settlement day without your physical presence required.
When do I get access to equity after refinancing?
If you're releasing equity, funds are usually available later on settlement day or the following business day, depending on banking processing times. Don't schedule payments or purchases for settlement day itself as timing can vary between lenders.
What happens if my old lender delays discharge?
If your existing lender delays releasing their mortgage after receiving payout, your broker and new lender will follow up on your behalf. Keep detailed records if you're charged interest by both lenders during the delay, as you can usually claim back duplicate interest once the issue is resolved.
