What happens at settlement of a private business mortgage?

If you’ve bought property before, you’ll know settlement as the day the keys change hands. For a private business mortgage, settlement is the day the money changes hands: the moment your existing lender is repaid (if there is one), the new security is lodged, and the loan funds land where you’ve asked them to go.

You don’t attend. The solicitors do the work in an online workspace. But knowing what happens — and what has to be ready beforehand — is the difference between a settlement that runs on time and one that slips by a week.

What has to happen before settlement can be booked?

Settlement is the final step of a short sequence. Each step depends on the one before it.

1. Enquiry and assessment. You describe the property, what’s owing and what you need. The property is assessed directly — no formal valuation required.
2. Letter of Offer. The lender sets out the amount, term, interest structure, security and the assessment fee. You sign and return it.
3. Loan documents. The lender’s solicitor prepares the loan agreement, mortgage (or caveat documents) and any guarantees, and sends them to your solicitor.
4. Signing and identity verification. Every borrower, director, mortgagor and guarantor signs and has their identity verified.
5. Payout figures. Your solicitor requests a payout figure from any existing lender being repaid.
6. Settlement booked. The solicitors agree a time and set it up in the electronic workspace.

Our how it works page shows the same steps from the enquiry side.

Why does everyone need their identity checked?

Under the national rules for electronic conveyancing, mortgagees must take reasonable steps to verify the identity of their mortgagors, and solicitors and conveyancers must do the same for their clients. They can use authorised identity agents to do it.

For you, that means every person signing has to complete ID verification before settlement. The usual trap is a forgotten signatory: a co-owner, a second director, or a family member providing security. Line them up early.

What actually happens inside the electronic settlement workspace?

Settlements increasingly run through an electronic workspace rather than a physical meeting. PEXA describes its process in five steps: a workspace is opened and the other parties invited; the required documents are prepared; a financial settlement schedule is set up that every party reviews and approves; all parties sign digitally; and at settlement, funds are exchanged electronically and eligible documents are lodged with the relevant land registry.

PEXA notes the settlement itself is typically completed within minutes once all parties are ready, and that cut-off times vary by jurisdiction and financial institution. In other words, the clock that matters is the preparation, not the event.

Party	What they do before and at settlement
You (the borrower)	Sign documents, complete ID, confirm where funds should go
Your solicitor or conveyancer	Reviews the loan documents with you, obtains payout figures, signs in the workspace
Lender’s solicitor	Prepares loan and security documents, sets up the lender’s side of the workspace
Outgoing lender (if refinancing)	Provides the payout figure and signs the discharge
Land registry	Receives the lodged documents and registers them on title

In what order do the documents hit the title?

When a private first mortgage replaces a bank loan, two things happen to the title at once: the old mortgage is discharged and the new one is registered. The order matters, and land registries handle it consistently. Landgate’s guidance explains that documents are normally registered in sequence — removing encumbrances first, then changes in ownership, then encumbrances on the new interest — and that priority follows the order of registration.

For a refinance, that means the bank’s discharge is processed before the new private mortgage, so the new loan takes first position. For a second mortgage, the bank’s mortgage stays put and the new mortgage is registered behind it. For a caveat loan, the caveat is lodged and noted on the title.

Electronic lodgment is now the norm for these documents. In Western Australia, for instance, eligible stand-alone mortgages and discharges have had to be lodged electronically since 1 December 2018.

Where does the money go on settlement day?

The financial settlement schedule — what most people know as the settlement statement — is where you see every dollar accounted for. A typical private loan settlement might show:

• Gross loan amount advanced by the lender.
• Payout to the existing lender, if the loan is refinancing a mortgage.
• Prepaid interest, if you’ve chosen to prepay it, held back from the advance.
• The assessment fee, as shown on your Letter of Offer.
• Legal and registration costs connected with the loan.
• Other payments you’ve directed, such as clearing a debt.
• The balance to your nominated account.

If interest is capitalised instead of prepaid, there’s no prepaid interest deduction — it’s added to the loan over the term. Our costs guide explains each line in more detail.

Illustrative example: A Perth developer refinances a $1.1m bank loan on two completed townhouses and draws an extra $500k to secure a new site. The new private first mortgage is $1.6m with interest prepaid. On Monday the Letter of Offer is signed and both directors complete ID. On Tuesday the bank’s payout figure arrives and the solicitors book settlement for Wednesday. At settlement, the bank receives its payout, its mortgage is discharged, the new private first mortgage is lodged, the prepaid interest and costs are held back, and the balance reaches the developer’s account in time to pay the site deposit.

Does settlement look different for a refinance, a second mortgage or a caveat loan?

The core event is the same, but the moving parts change with the structure.

Structure	Who else is involved	What’s lodged on title	Typical sticking point
Private first mortgage replacing a bank	The outgoing bank	Bank’s discharge, then the new mortgage	Waiting on the bank’s payout figure and discharge
Private first mortgage on debt-free property	No other lender	The new mortgage only	Usually none — often the simplest settlement
Second mortgage	The existing first lender stays in place	The new mortgage, behind the first	Checking the existing loan terms on further security
Caveat loan	The existing lender stays in place	A caveat	Usually the quickest; few third-party steps

A refinance has the most moving parts because a third party — the outgoing lender — has to cooperate on its timetable. That’s why our page on refinancing a bank first mortgage puts so much emphasis on ordering the payout figure early. A debt-free property or a caveat loan has the fewest, which is why those tend to be the deals where same-day funding is possible for amounts from $20k to $250k.

What should you check on the settlement statement before you approve it?

You’ll usually be asked to confirm the funds directions before settlement. Take five minutes to check:

• The gross loan amount matches the Letter of Offer.
• The payout figure for any existing lender is current and dated for settlement day, not an older estimate.
• Prepaid interest (if any) matches the period agreed.
• The assessment fee matches the amount shown on the Letter of Offer.
• Your nominated account details are correct — read them digit by digit.
• Any third-party payments you’ve asked for, such as clearing a supplier or tax debt, are listed with the right reference numbers.

A mistake caught the day before costs nothing. A mistake caught after settlement can take days to unwind.

What are the most common causes of delay?

Nearly every delayed settlement traces back to one of these:

• Late payout figures. Outgoing lenders can take days to issue them. Ask for yours as soon as the deal looks likely to proceed.
• A missing signatory or incomplete ID.
• No solicitor appointed when the Letter of Offer is accepted.
• Undisclosed debts on title, such as an old caveat or second mortgage nobody mentioned.
• Funds directions changed late, forcing the settlement statement to be redone.
• Missing the cut-off for the day’s settlements.

If speed is the priority, our page on fast second mortgages explains what shortens the timeline, and our document checklist helps you have everything ready.

What happens after settlement and at the end of the loan?

After settlement, the land registry registers the lodged documents. Titles Queensland, for example, says most correctly prepared dealings are registered within its service time of three to five working days.

When the loan is repaid — on sale, refinance or from other funds — the process runs in reverse. The lender signs a discharge (Queensland calls it a release) of the mortgage, and once registered the mortgage no longer appears on the title. Landgate’s guidance notes that all mortgagees must sign a discharge, and that it can be total or, in some cases, partial — useful where one of several security properties is sold and released. If the security was a caveat, the caveat is withdrawn.

Ready to get to settlement? Start with a quick check

The fastest settlements start with an accurate enquiry. Tell us about the property and what you need — it takes about a minute, there’s no credit check to enquire, your information stays with one specialist rather than travelling to a panel of lenders, and someone with lending experience reads every enquiry.

Give us the full picture on what’s owing against the property, and we can map the settlement properly from the start, with no surprises on the day. Check your eligibility now.