For many Australians, upgrading or downsizing the family home can be an exciting yet stressful time.
Should I buy before selling or the other way round? Will I need to get a bridging loan to facilitate the process?
Both these questions and many others around timing or finances are likely to dominate the kitchen table conversation when buying and selling a property within a short time frame.
But what if you can do both at the same time?
A simultaneous settlement lets you buy and sell on the same day – avoiding the cost and stress of bridging loans or short-term rentals. Yet pulling it off takes smart planning and teamwork.
Here’s what you need to know about simultaneous settlement and how to make it happen with maximum efficiency and minimal risk.
How Simultaneous Settlement can benefit you
Managing the purchase of a new property and sale of your existing one to both settle on the same day may seem ambitious, but with thorough planning this is definitely achievable.
And it has significant benefits if you can.
One of the main reasons homeowners choose this option is to avoid the extra financial burden of a bridging loan. These are a short-term loan used to “bridge” the financial gap between buying a new property and selling an existing one.
While bridging loans allow you to purchase a new home before your current one is sold – giving you access to the equity in your existing property as security – they incur interest costs that increase the overall burden of your property transaction.
A simultaneous settlement alleviates the need for this type of loan, saving you the interest you would pay in the interim.
This is equally beneficial in reverse too.
If you choose to sell your home before buying a new one, you are likely to need to rent property in the meantime. A simultaneous settlement saves you the rent you would have to pay in this scenario, as both the purchase and the sale transactions are settled on the same day.
It’s important to highlight at this point that a simultaneous settlement involves two transactions that are interdependent.
In effect, the funds from the sale of your property are used to purchase the one you are buying – which is why planning is so important.
Here’s how a typical process for simultaneous settlement works in practice:
- You sell your existing property.
- The proceeds are used immediately to fund the purchase.
- Both financial transfers happen on the same day via the conveyancers and lenders.
This type of transaction has become increasingly popular with homebuyers in recent times, as the advent of digital settlement platforms such as PEXA have made same-
day settlements more feasible.
The financial benefits of a simultaneous settlement are one reason for this, along with the convenience of moving from one property to the other at the same time.
Extra piece of mind that it’s all over on the same day also reduces the uncertainty.
So now we’ve clarified why they can be a good idea, what is the best way of planning for a simultaneous settlement?
5 Key Steps to Prepare for a Smooth Simultaneous Settlement
When managing both buying and selling a property on the same day, planning and organisation is the critical factor in getting this process over the line.
Here are the five steps we would recommend you put in place to ensure your simultaneous settlement goes to plan:
- Align Contract Dates – Ensure both contracts specify the same settlement date and include flexibility clauses if possible (e.g. a right to adjust by a few days if required).
- Engage an experienced conveyancer/solicitor – Choose someone who can demonstrate previous handling this process, manage both transactions and is confident liaising with lenders when required.
- Communicate with your lender early and often – Confirm whether your bank supports same-day settlement and what documentation they need.
- Plan your finances carefully – Know when and how your deposit and sale proceeds will be transferred. Ensure you have a small buffer for costs like stamp duty or adjustments.
- Organise your move strategically – Book removalists well in advance and consider having a temporary storage facility on hand if one settlement is delayed.
While all five of these steps are essential for a smooth settlement, one of the biggest mistakes we see with customers who are planning this type of transaction is leaving communication with their lender or conveyancer until too late in the process.
Getting this done early and having temporary storage available as a back-up if something goes wrong are good ways of reducing your stress levels too.
Why a good mortgage broker can help in the process
With a lot to organise and plan, having professional support through the process of a simultaneous settlement is a good idea.
And that’s where a good mortgage broker can be invaluable.
Firstly, they will be able to arrange a pre-approval on your loan so you know what you can afford to buy. Managing the coordination with lenders once contracts have been exchanged to ensure funds are in place is another vital piece of the puzzle a broker can help with.
Secondly, a good broker can recommend a suitable conveyancer that has experience in handling this process, putting your mind at rest that your big move is in capable hands from a legal perspective.
Finally, having someone on the end of the phone or in person to guide you through any glitches in the process – and there is always one! – is invaluable for peace of mind.
Finding an experienced broker to manage the liaison with lenders will save you time and set you up for a successful transaction.
As we’ve outlined, with the right planning, a simultaneous settlement can make your move seamless and stress-free, while saving you significant amounts of cash in the process.
And by having both your sales and purchase settle on the same day, the keys to your new property can be yours sooner than you might have hoped..
Loanscope has helped scores of customers manage the process of a simultaneous settlement to secure a house move that saves them time and money. Contact us to arrange an obligation-free discussion on how we can guide you.
Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
