Deposit Paid Versus Cash Still Needed at Settlement

Exchange and settlement are two different money events. At exchange you sign the contract and pay the deposit, often 10% of the price though the contract sets the amount and timing (at auction it is usually payable on the day). That money is held in trust, typically by the agent, and is credited against the price. Nothing about it is lost or added on; it simply reduces the balance due later.

Settlement is the day the title transfers into your name and the mortgage starts. Your conveyancer or solicitor works out the balance of the price (price less loan less deposit), adds the costs that fall due at the same time, and directs your lender's money and your own funds to the right accounts. Settlement is usually completed electronically now, so you do not attend; you receive the keys once both sides confirm the funds have moved.

The settlement statement, sometimes called the adjustment sheet or settlement figures, is the document that turns the price into the actual cash you need. Your conveyancer prepares it and sends it to you for approval, usually in the last week before settlement, once the vendor's side has supplied the rates, water and strata figures. Read every line against your own list. The items that usually appear:

Your conveyancer will ask for your contribution as cleared funds a few days before settlement, not on the day, because the money has to sit in a trust account or be verified by the lender before the transaction can proceed. If your savings are in a term deposit, a notice-period account or another person's name, start moving them at least a week out and keep the receipts. Confirm the account details by phone, using a number you already have, because payment redirection scams target this exact step.

Settlement is not the end of the spending. Budget for removalists, connection fees for power, internet and gas, locks, cleaning and whatever the building report said needs fixing first. Then hold a reserve, as a rule of thumb a few months of loan repayments, so an early rate rise or a broken hot water system does not become a credit card debt in the first year.

Lenders generally lend against the lower of the price and their own valuation. If the valuer says the property is worth less than you agreed to pay, the lender may cut the loan so its loan-to-value ratio still fits your approval, and every dollar the loan shrinks is a dollar you must find in cash by settlement day. A lower loan can also push you above 80% LVR on the lender's figures and into LMI if you had planned to avoid it. This is general information only. If it happens, talk to your lender or broker straight away about options, and to your conveyancer about what the contract allows, because the settlement date does not move on its own.

The most common error is treating the deposit as a cost on top of the price. It is not; it is the first instalment of the price, which is why the calculator subtracts it. The mirror-image error is counting a cost twice: the building and pest inspection, valuation fees and any lender application fee are usually paid before settlement, so they belong in the total outlay but not in the settlement-day figure. People also forget adjustments entirely, assume stamp duty is always waived for first home buyers (it depends on the state, the price and whether you will live in the home), and rely on a grant that is paid after settlement rather than at it. Finally, planning to arrive at settlement with nothing left is a plan for a stressful first year of ownership.