Signing your 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 this.
So, what is a mortgage?
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.
Mortgage documents tend to be generic but your solicitor will take you through this to ensure that you understand your all your obligations, such as ensuring the property is fully insured and that the property is well maintained and land rates are paid, as examples.
It is important that you are aware of all the requirements of the mortgage, so we encourage you to read the document fully.
What is Priority Sum?
Among the many clauses in the mortgage document, you will note a clause referring to ‘priority sum’. A priority sum is always for more that the value of the home loan (often one and a half times the value). The reason for this is firstly to protect the lender in the event of default on the mortgage. With outstanding fees and interest the lender could be owed more than the original sum borrowed. Another reason that benefits the borrower is in the event the borrower wishes at a later date to increase their borrowing, the priority sum registered will not need to be increased. The saves time and additional costs.
Click here for an example of Westpac’s memorandum of mortgage – terms & conditions
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.
While many Kiwis tend not to bother with the pre-settlement check, it is a good idea as it allows you to identify any problems with the property subsequent to you making your offer. If you do complete a pre-settlement check and issues are identified, we recommend that you contact your solicitor who can then liaise with the vendor’s solicitor with a view to remedying the problem(s).
So, what happens on settlement day?
On settlement day, your solicitor will be waiting on funds to be paid to them from your bank or lender. Banks will usually settle in the morning, but settlements can occur as late as 4:30pm on a business day.
Once your solicitor has received funds from the bank these are then paid to the vendor’s solicitors trust account for settlement.
The change of ownership is then registered with the Land Transfer office, the previous owners name is removed from the certificate of title and replaced with your name. The certificate of title will also show your bank/lender as having a registered mortgage on the property. The sum of the mortgage is not disclosed on the certificate of title.
Settlement day can be very frustrating as you cannot be sure of exactly when your settlement will occur and you cannot take possession of the property until then.
All too frequently laden removal trucks are parked outside waiting for settlement to occur. Often too, the vendors are still in the process of moving out!
If at all possible you may wish to consider making your move to the property the day following settlement – this reduces stress and ensures you have easy access and the previous owners have fully moved out.