How much do I need to pay on settlement day?
Aside from the rest of the purchase price, there are other things that must be paid for by the purchaser on settlement day.
Settlement is the legal process for transferring ownership of a property, conducted via the online PEXA e-conveyancing platform. It's the date the purchaser becomes the new owner of the property. Settlement usually takes 30-45 minutes to complete, shorter if there are no banks involved. And settlement occurs on the settlement date listed in the contract, or on another date that the parties subsequently agree to.
On settlement day, the purchaser must pay the rest of the purchase price - usually the remaining 90%, if they paid a 10% deposit, or 95% if they paid a 5% deposit. The 'balance' of the purchase price can be paid entirely from the purchaser's savings (no mortgage), but usually a bank will provide a loan for most of the remaining funds owing, and the purchaser will also contribute a portion from their savings.
Stamp duty (if applicable) must be paid on settlement day (more about stamp duty in our earlier blog post here); so must government transfer of land and (if applicable) mortgage registration charges. Stamp duty and transfer of land fees are charges on a sliding scale, depending on the purchase price. There are no first home buyer discounts for transfer of land fees.
A compulsory PEXA fee (effectively another government charge) is also payable - this replaces the old settlement agent fee for paper settlements, prior to the introduction of the PEXA system about seven years ago. The PEXA fee applicable depends on how many titles there are; it's currently $132.56 for a property with one title. The PEXA fee increases on 1 July every year. More about PEXA and the conveyancing process in our earlier blog post here.
Pro rata apportioned outgoings must also be paid by the purchaser at settlement. These are Council rates, water charges, any land tax and (if applicable) Owners Corporation fees for the current billing period. The purchaser must pay their share of these current outgoings upfront, at settlement, and then the bills are paid out at settlement (a legal requirement), so nothing is then currently owing to the Council, water company, State Revenue Office and Owners Corporation. The Statement of Adjustments is an itemised summary of the total funds owing to the vendor at settlement, and it includes the pro rata apportioned outgoings. The Adjustments is also where one-off items are accounted for, such as any credit the vendor currently has with the water company, or any furniture the purchaser is separately buying from the vendor. Licence agreement fees and penalty interest are also accounted for in the Statement of Adjustments.
The purchaser's legal costs are also paid at settlement - these are automatically paid out of the total pool of funds payable in the PEXA system. The purchaser's lender/bank may also require their legal costs, PEXA fee, lender's mortgage insurance (if applicable) and other internal fees to be paid at settlement.
Note: the above is general information and should not be considered as legal advice. Image via Freepik