Article by Patrick Lynch, Head of Operations
Congrats, your loan has been formally approved. All the hard work is over – right? Yes, but the loan offer documents still have to be signed/ completed and returned, before settlement can be arranged. This paperwork can be overwhelming.
Here’s an overview of the five key loan offer documents which typically need to be completed:
- Loan Offer: This document contains the terms of the loan, i.e. amount, interest rate, repayment arrangements, fees, purpose, etc. It is important to check that the details are correct, matching the original strategy or any subsequent agreed changes. Once signed the Borrower has accepted the Bank’s offer of finance.
- Credit Summary: This summarises the information supplied by the Borrower to the Broker, verified by supporting documents, which the Bank relied upon in making its offer of credit. It is important that this be fully checked and anything credit critical (income overstated or expenses understated) brought to the Lender’s attention, as otherwise the loan may not be suitable.
- Direct Debit Authority: This confirms for the Lender how the loan will be repaid – frequency (e.g. weekly, fortnightly or monthly) and source (e.g. an account with the same Lender, or another institution). It is very important to accurately complete these details as, if repayments aren’t made, the loan will go into arrears, attracting a fee plus a higher interest rate.
- Settlement Authority: The settlement authority sets out how the loan proceeds are to be used, i.e. to refinance an existing loan, or to go towards a purchase, etc., as well as any fees that may be deducted at settlement (e.g. legal or settlement fees). If the Lender allows, the Borrower can also nominate an account for any shortfall to be debited from, or surplus funds to be paid to, at settlement.
- Mortgage: The Mortgage is very important, it allows the Lender to take a charge over the property offered as security, and it will be lodged to the relevant State or Territory Land Titles Office. The document shows the legal details (land title reference) of the property, and confirms the owner (mortgagor) and lender (mortgagee). Depending on the State or Territory, the witness to the client signature may need to be qualified (e.g. legal representative, JP, pharmacist, etc. – this will be clearly stated if required).
There are also the various terms & conditions to be reviewed but these generally don’t need signing. If any of the terms don’t make sense, it is okay to ask for more information, but they tend to be standard for the loan and industry and won’t be changed by the Lender.
Now you know what, what about how and when?
At Long Property, we encourage clients to attend the office so we can explain and assist with correct completion and signing, before being returned to the Lender. If not possible, we provide alternative arrangements such as printing, preparing (‘sign here’ stickers) and delivering to a preferred address. Sometimes some documents can be electronically signed; and at all times we can assist with queries by phone or email. If documents are physically signed, it is important that signatures are consistent, not just in the documents themselves but with the original application form and ID.
If the loan offer documents are not completed correctly, the Lender might ask you to re-sign which could delay settlement. Once documents are back with the Lender or their legal representatives, allow 3 clear days for checking after which settlement arrangements can be made. And if you’ve ever any queries, please ask – that’s why we’re here!
Long Property blog content provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Nothing on the Long Property website constitutes legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances
