Lender's offer letter - Once the lender has approved your loan application, they will send you a loan offer letter. This is an important legal document that sets out the conditions, including interest rates, which will apply to your loan. It is important that you read this letter carefully and ensure that you understand and agree with the contents. If there is anything that you do not understand or agree with, you should seek advice from your broker, solicitor, or the lender.
Lender's loan terms and conditions - Along with the offer letter, the lender will provide you with a copy of the detailed loan terms and conditions, which can be in the form of a contract, or a booklet. This is an important legal document, as it sets out the terms, conditions and obligations of you and the lender.
Accepting the loan offer - When you are happy to proceed with the loan and sure that you understand and agree to the conditions, you should arrange to sign and return the documents to your broker. Remember, that you will be entering into a legally binding contract, so be sure to seek advice if there is anything that you don't understand.
Arranging a mortgage over your property
Once you have signed the loan offer, the lender will start to make arrangements to take a mortgage over your property. At this point, if you have not already done so, it is best to engage a solicitor or licensed conveyancer to assist you.
A mortgage is a legal mechanism that provides the lender with a charge over your property, as security in the event you fail to fulfil obligations under the loan contract. In essence, the impact of a mortgage is that you cannot sell or transfer ownership of your property, until such time as the lender has received all of the money to which it is entitled under the loan agreement. If you fail to fulfil your obligations under the loan contract, in particular in regard to making scheduled loan repayments, an exhaustive process will apply which will include as the final step, the lender's right to sell your property.
How the lender arranges the mortgage - as part of the fulfilment process, the lender will conduct various procedures such as title searches to ensure that you are, or will become, the rightful owner of the property. These procedures are most effectively handled between the lender and your solicitor or licensed conveyancer.
Arranging the settlement
The last step prior to settlement is arranging a settlement date. While this may sound straight forward, in practice it can be quite complicated, depending on the circumstances. For example, if you are refinancing a property that you currently own, it will involve coordination between the outgoing lender and the incoming lender. If you are purchasing a new property, it will involve coordination between the seller's solicitor and their lender, along with your solicitor and your lender.
Your solicitor, broker and lender will pre-arrange with you what money will need to come in (for example your deposit) and what money will go out, for example payments to the seller, stamp duty, your conveyancing and other costs.
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