Signing a Mortgage
Once you have confirmed your loan structure with your bank or lender, they will prepare the mortgage documents which are then sent to your solicitor for signing.
You will need to make an appointment with your solicitor to complete the signing of your mortgage documents. This is an important legal step in the home buying process.
Key Points About Signing a Mortgage
- Your solicitor will guide you through all mortgage documents before signing
- Priority sum is typically 1.5x your loan amount (this is normal)
- Do a pre-settlement inspection before settlement day
- Property must be insured, maintained, and rates paid at all times
- Settlement can occur anytime between morning and 4:30pm
- Consider moving the day after settlement to reduce stress
So, What is a Mortgage?
A mortgage is a legal agreement that conveys the conditional right of ownership on an asset or property by its owner (the mortgagor) to a lender (the mortgagee) as security for a loan.
The lender's security interest is recorded in the register of title documents to make it public information, and is voided when the loan is repaid in full.
Key Points About Mortgage Documents:
- •Mortgage documents tend to be generic templates
- •Your solicitor will take you through the document
- •Ensure you understand all your obligations
- •Property must be fully insured at all times
- •Property must be well maintained
- •Land rates must be kept up to date
Important: It is crucial that you read the mortgage document fully and understand all requirements before signing.
What is Priority Sum?
Among the many clauses in the mortgage document, you will note a clause referring to 'priority sum'. This often confuses first home buyers, so here's what it means:
Understanding Priority Sum:
Always Higher Than Your Loan
The priority sum is usually 1.5 times the value of your actual home loan amount.
Protects the Lender
In the event of default on the mortgage, outstanding fees and accrued interest could mean the lender is owed more than the original sum borrowed.
Benefits You Too
If you wish to increase your borrowing in the future, the priority sum already registered won't need to be increased. This saves you time and additional costs.
Pre-Settlement Check
Strongly Recommended
As the purchaser, you are entitled to complete a Pre-Settlement Inspection prior to your settlement being finalised. The property must be in the same state and condition as at the date you entered into the Agreement for Sale and Purchase.
Why Do a Pre-Settlement Check?
- •Many Kiwis don't bother, but it's a good idea
- •Allows you to identify problems that occurred after you made your offer
- •Ensure agreed chattels are still there and in working order
- •Check no damage occurred during vendor's move-out
If Issues Are Identified:
Contact your solicitor immediately. They can liaise with the vendor's solicitor with a view to remedying the problem(s) before settlement.
Settlement Day!
The Big Day
What Happens on Settlement Day:
Your solicitor waits on funds to be paid from your bank or lender
Banks usually settle in the morning, but settlements can occur as late as 4:30pm on a business day
Once received, funds are paid to the vendor's solicitor's trust account for settlement
The change of ownership is registered with the Land Transfer office
Previous owner's name is removed from the certificate of title and replaced with YOUR name!
Certificate of title shows your bank/lender as having a registered mortgage on the property (but NOT the sum of the mortgage)
Settlement Day Can Be Frustrating:
- •You cannot be sure of exactly when your settlement will occur
- •You cannot take possession of the property until settlement occurs
- •Laden removal trucks are often parked outside waiting
- •Vendors may still be in the process of moving out
Pro Tip:
If at all possible, consider making your move to the property the day AFTER settlement.
This reduces stress enormously and ensures you have easy access to the property once the previous owners have fully moved out.
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Frequently Asked Questions About Signing a Mortgage
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