When is the first mortgage payment due after settlement in Australia?


Buying a home in Australia can feel confusing, especially if you’re a first-time buyer. There are many processes to follow, including applying for a mortgage, closing the home sale, and getting through settlement day. If you’ve recently been approved for a mortgage, you also might be confused about when you’re expected to make your first monthly repayment. 

If this sounds like you, you’ve come to the right place. In this article, we’ll cover everything you need to know about your mortgage repayments, settlement date, and what happens next. 

Let’s get to the following commonly asked questions: 

  • How long after a settlement is the first mortgage payment?
  • How long after closing is the mortgage paid off?
  • What is the start date of the mortgage?
  • When you buy a house is the first mortgage payment taken on day one?
  • How long does it take for funds to clear after settlement?
  • How do I prepare for settlement day?
  • What happens on settlement day?

Q1. How long after a settlement is the first mortgage payment?

After the settlement process, repayments start in the next calendar month, around 30 days after completion. It’s usually set at the start of the month. For example, if you settled on the 24th of September, your first mortgage payment would likely be the 1st of November. 

When you start paying off your mortgage, your first mortgage payment will likely be higher than your normal monthly mortgage payment as it will include interest that covers the days after moving in and before your first payment is due. 

Q2. How long after closing is the mortgage paid off?

How long it takes you to pay off your current mortgage after closing depends entirely on the length of your home loan amount, your monthly payments, and how much interest you’re paying. The average time it takes to pay off a mortgage is 25 to 30 years in Australia, though this depends on your loan term. 

For instance, if you’re paying off your second property you’ll likely take less time to pay off the mortgage, as you’ll have access to the equity in your first home. Whereas if you’re buying your first home, you could need a longer loan term to keep monthly mortgage repayments low. 

Q3. What is the start date of the mortgage?

The start date for your mortgage depends entirely on when you settled your mortgage, however, the first payment is typically due at the start of a new month, around 30 days after you initially moved in. Home loan repayment only starts when you’ve closed the mortgage.

Important: Your first mortgage payment is never due on the day you move into your property and payments start after at least 30 days. 

Q4. When you buy a house is the first mortgage payment taken on day one?

No, when you buy a house your mortgage provider will never ask for the first payment on the day you move into your new property. Payment will be due at the beginning of the month, around 30 days after you’ve moved in. Most mortgage lenders will make sure you are well informed about when your repayment falls due. 

Q5. How long does it take for funds to clear after settlement?

If your home loan settlement was done in person, you’ll likely need to wait seven to 28 business days for the bank cheque to clear. On completion day, you’ll need to transfer funds to the seller to officially buy the house. 

Closing costs can vary depending on the real estate you’re buying. In Australia, fees typically range between 2 and 5 percent of the purchase price of the property. If you decide to take out mortgage insurance, these costs could be even higher. If you’re unsure of how much you’ll need to pay, consult with the mortgage brokers in charge of your loan. 

Q6. How do I prepare for settlement day?

During the home buying process, you’ll likely know the settlement date ahead of time as it’s set by the seller in the contract of sale. Preparing for settlement can be stressful, especially if you’ve never bought a house before. 

To prepare for settlement, make sure to hire a solicitor or conveyancer  to act in your interests during the settlement process. You also need to make sure that you have your money organised in order to make sure you can make the payment due after closing. It’s a good idea to also have homeowners insurance sorted prior to the settlement date. 

Q7. What happens on settlement day?

Your solicitor will meet with the lender and seller on the day of settlement to exchange important documents. They then organise the date on which the purchase price will be paid to the seller. 

On settlement day, the solicitor will: 

  • Check that the existing mortgage on the property is discharged.
  • All previous rights over the property are removed.
  • All sales contract clauses are fulfilled.
  • The transfer of the mortgage with the title office.

Note: You might also be wondering - what happens after settlement? Your mortgage lender will debit the amount they paid on settlement day to your loan account, meaning you’re now responsible for all mortgage payments due. You can collect the keys from the real estate agent and move into your new property. 

Summing up

If you’ve started the process of purchasing a new home, congratulations! We understand that mortgages can be confusing for home buyers, especially when it comes to your mortgage payment due date. We hope this article helps you get one step closer to finalising your mortgage and becoming a homeowner. 

If you liked this article, make sure to stay up-to-date with our blog, where we provide financial advice. If you’d like more guidance on being a homeowner, read our article on ‘How to pay off your mortgage faster.’

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs, or financial situation.

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