How to Avoid Settlement Penalties – A Case Study
Unexpected Settlement Delays Can Be Costly
Buying a home is an exciting milestone, but unexpected delays before settlement can lead to costly penalties. Understanding how to navigate these challenges can save you thousands and ensure a smooth property purchase.
A Real-Life Example – Avoiding Settlement Penalties
Meet Connie Wilson, a first-home buyer who was on track to secure her dream home—until an issue with her deposit threatened to derail the settlement process.
Connie had exchanged contracts and was preparing for settlement when she realised that her deposit, a gift from her parents, had not been in her account long enough to qualify as genuine savings. Lenders typically require funds to be held for at least three months, and Connie’s deposit was due to reach this milestone just nine days before settlement.
Faced with the possibility of costly penalty interest for a settlement extension, Connie sought advice from a mortgage broker.
How a Mortgage Broker Helped Avoid Penalties
Instead of requesting a two-week extension, which could have cost Connie $400 per day, her broker took immediate action:
- Reviewed lender policies to find a suitable loan option
- Contacted multiple lenders to explore alternatives
- Secured conditional loan approval on the same day
- Fast-tracked the valuation process, ensuring formal approval before settlement
Thanks to her broker’s expertise, Connie was able to settle on time without incurring penalty fees.
What Are Settlement Penalties?
Settlement penalties occur when a buyer fails to complete settlement on time. These penalties can include:
- Daily interest charges imposed by the seller
- Additional legal fees for contract extensions
- Potential loss of deposit if settlement is significantly delayed
To avoid these penalties, buyers should ensure their finances are in order well before settlement.
How to Protect Yourself from Settlement Delays
1. Understand Genuine Savings Requirements
Lenders typically require deposits to be held for at least three months to qualify as genuine savings. If your deposit is a gift, ensure it meets lender criteria before applying for a loan.
2. Get Pre-Approval Early
Securing home loan pre-approval ensures you know your borrowing capacity and can act quickly when you find the right property. Learn more about home loan pre-approval to stay ahead.
3. Work with an Experienced Mortgage Broker
A mortgage broker can help you navigate lender policies, secure fast approvals, and avoid costly delays. At CBM Mortgages, we specialise in helping buyers avoid settlement penalties and secure the best loan options.
Need Expert Mortgage Advice?
If you’re buying a home, ensuring a smooth settlement process is crucial. At CBM Mortgages, we provide expert guidance to help you avoid penalties and secure the right loan.
Call us today on 02 8068 0534 or visit CBM Mortgages to get started.
Further Reading:
- Learn about property market trends on realestate.com.au
- Explore first-home buyer grants in NSW here (Revenue NSW)
- Get financial insights from CoreLogic
- Go to our dedicated First Home Buyers page here
- Read more on our blog on genuine savings here
Disclaimer:
The information provided in this article is for general guidance only and does not constitute financial or tax advice. It does not take into account your personal circumstances. Before making any financial decisions, seek professional advice from a licensed mortgage broker or financial consultant. This content is protected by copyright laws and cannot be modified, reproduced, or republished without prior written consent.
Written by Craig McDonald 14/06/2025
