10 Steps in Refinancing Settlement Procedures

How Refinancing Settlement Works

Refinancing settlement is the process where your new lender pays out your existing home loan and registers their security over your property. The settlement date is when ownership of the debt transfers from your old lender to your new one, and when any additional funds you've accessed become available.

The timeline from approval to settlement typically runs three to six weeks, depending on how quickly your current lender provides discharge information and whether your property valuation requires an inspection. In Surrey Hills, where many properties are period homes with renovation history, valuers often need physical access rather than relying on desktop assessments, which can add five to seven days to the process.

Step 1: Formal Approval and Loan Documents

Once your refinance application receives formal approval, your new lender prepares loan documents for signing. These documents include the loan contract, any mortgage guarantee forms if you're borrowing above 80% of your property value, and direct debit authorities. You'll also receive a settlement date proposal, usually four to five weeks from the date of approval.

Consider a Surrey Hills homeowner refinancing a $750,000 loan to access equity for an investment property purchase. Their new lender proposes a settlement date, but that date must align with when they need funds available for the investment deposit. If the dates don't match, the settlement can be brought forward or pushed back by negotiating with both lenders, though shorter timeframes mean tighter coordination.

Step 2: Requesting the Discharge Authority

Your new lender or conveyancer contacts your existing lender to request a discharge authority, also called a payout figure. This document states exactly how much is owed on your current loan at settlement, including any break costs if you're exiting a fixed rate, outstanding fees, and daily interest calculations up to the proposed settlement date.

Break costs can appear on the discharge authority if you're coming off a fixed rate period before the agreed term ends. The calculation depends on how much time remains and the difference between your contracted rate and current wholesale rates. In one scenario, a Surrey Hills borrower exiting 18 months early on a loan fixed at 2.1% faced $8,400 in break costs because rates had risen significantly. That cost was factored into whether refinancing still delivered a net saving over the following two years.

Step 3: Reviewing the Payout Figure

The payout figure from your existing lender includes the principal balance, accrued interest to settlement date, discharge fees (typically $300 to $400), and any other charges tied to your loan account. If you have an offset account or redraw facility, confirm whether any funds in those accounts will be returned to you at settlement or need to be withdrawn beforehand.

Some lenders release offset balances automatically at settlement, while others require you to transfer the funds out before the loan closes. If you're relying on those funds to cover settlement costs or other expenses, clarify the process at least two weeks before settlement.

Step 4: Signing Loan Documents

You'll sign your new loan documents either electronically or in person, depending on your lender's process. Electronic signing has become standard and usually takes 10 to 15 minutes through a secure portal. Once signed, the documents go to your new lender's settlement team, who prepares the payout instruction and coordinates with your existing lender.

If you're accessing equity as part of the refinance, the loan amount will be higher than your payout figure. The difference is held by your new lender and released to your nominated account on settlement day, after the old loan is discharged.

Step 5: Title Search and Property Verification

Your new lender conducts a title search within a few days of settlement to confirm there are no new encumbrances, caveats, or changes to the property title since your application was assessed. This is a standard protection step but can occasionally reveal issues like an unregistered easement or a caveat lodged by a tradesperson over a payment dispute.

In Surrey Hills, where properties sometimes have heritage overlays or share rights of way with neighbouring blocks, the title search confirms what restrictions exist and whether they affect the lender's security position. Any unexpected findings can delay settlement until resolved.

Step 6: Settlement Coordination Between Lenders

Your new lender's settlement agent contacts your existing lender to confirm the settlement date, payout amount, and bank account details for the funds transfer. Both lenders must agree on the same date, and any change requires both parties to approve.

If you're also coordinating settlement with a property purchase using the equity you're releasing, timing becomes critical. The refinance settlement must occur at least one business day before the purchase settlement to allow released funds to clear into your account. In our experience, allowing a two-day buffer reduces the risk of delays caused by processing issues.

Step 7: Final Funds Confirmation

A day or two before settlement, your new lender confirms the exact amount they'll transfer to your old lender and calculates any additional funds being released to you. If you're required to contribute funds to settlement, such as covering a shortfall or break costs not covered by the new loan, you'll receive instructions on when and where to transfer that amount.

Settlement usually occurs mid-morning, with funds transferred between lenders electronically. Your old lender receives the payout, applies it to your loan balance, and issues a discharge of mortgage document to release their security over your property.

Step 8: Discharge of Mortgage and Title Update

Once your old lender receives the payout funds, they prepare a discharge of mortgage form and lodge it with Land Use Victoria (or the relevant state authority). This removes their caveat from your property title. Your new lender simultaneously lodges their mortgage document to register their security interest.

The registration process typically completes within five to ten business days after settlement. Until registration is complete, your old lender's mortgage still appears on the title, even though the loan is paid off. You can check the progress through a title search if needed, though most lenders confirm registration directly once it's finalised.

What Happens to Offset and Redraw Balances

Any funds in an offset account linked to your old loan are released back to you, either automatically or upon request, depending on your lender's process. Redraw balances are usually absorbed into the payout figure, meaning you'll need to access those funds from your new loan if required.

If you've been using an offset account to manage tax-deductible debt for an investment property, setting up a new offset with your new lender before settlement keeps that strategy intact. Some borrowers mistakenly assume the offset transfers across, but it closes with the old loan, and a new account must be opened.

When Additional Funds Are Released

If you're accessing equity, the additional funds are transferred to your nominated account on settlement day, after your old loan is paid out. The timing varies by lender, but most release funds by early afternoon on settlement day.

Those funds are then available for whatever purpose you've nominated, whether that's purchasing an investment property, funding renovations, or consolidating other debts. If you're using the funds for a time-sensitive transaction, confirm the expected release time with your new lender a few days before settlement.

Final Confirmation and Loan Activation

Once settlement completes, your new lender sends confirmation that the loan is active, along with details of your first repayment date, online account access, and any linked offset or redraw facilities. Your first repayment is usually due one month after settlement, though some lenders allow you to choose a preferred payment date within that first month.

You'll also receive a settlement statement showing the exact breakdown of how funds were applied: the payout amount, any fees deducted, and the net amount released to you if applicable. Keep this document with your loan records, as it's useful for tax purposes if the refinance involved accessing equity for investment.

If you're currently weighing whether to refinance or want to understand whether your loan structure still suits your circumstances, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions