Read Time: 3-4 minutes
Video Time: 2 minutes each
Click here to watch our example video for the settlement statement.
Click here to watch our example video for the statement of account.
Understanding the Settlement Statement and the Statement of Account.
In this newsletter, we’ll explain the essential aspects of both the settlement statement and the statement of account. These are crucial documents for first home buyers, and understanding them will help ensure a smooth and stress-free settlement process. You’ll learn how money flows, how rate adjustments work, and what you need to prepare in advance.
First home buyers often find it challenging to distinguish between these two essential documents:
This document details the purchase price minus the deposit, along with adjustments for rates (always) and possibly body corporate levies or resident society fees. These levies often need to be paid upfront for the entire year, which could leave your client needing an extra $1,000, $2,000, or more. In short, this is the amount the purchaser’s lawyer must pay the seller’s lawyer. Refer to Balance $999.022.83 shown below.
This document records the movement of funds in and out of your lawyer’s trust account. This acts a client’s bank account ledger for their purchase. Common issues include:
To summarise, this is the amount the first home buyer needs to pay their lawyer to cover the settlement amount due to the seller’s lawyer ($999,022.83) and the legal invoice ($3,325.35). In the above example, A Wright had to pay the final $19,022.83 to cover the legal invoice and settlement amount.
Misunderstanding these documents, timelines, and how the money flows can lead to several risks:
First time buyers may overlook that rates are prorated based on how long each party occupied the property. This could result in unexpected costs.
The legal invoice must be paid with the final settlement amount, and failing to account for this can cause last- minute financial stress.
Daily bank transfer limits could prevent you from completing the payment in full, delaying the settlement.
Delays in KiwiSaver withdrawal can jeopardise timely payment, which is crucial for your settlement day payment.
Many first home buyers mistakenly believe they need to pay the entire deposit (typically 20%) when they go unconditional—instead, they often only need to pay 10%, with the remainder of their deposit (equity) being paid at settlement.
Without proper guidance, the settlement statement and statement of account can appear as just numbers on a page. As mentioned earlier, when a first home buyer considers their final settlement amount, they often think in terms of:
However, this overlooks critical adjustments and additional costs.
To ensure first home buyers fully understand the settlement statement and the statement of account, I recommend using video and screen recordings via Loom. Here’s how this can help:
I like to create a Loom video that visually guides first home buyers through the flow of money on settlement day, making terms, credits, debits, and final amounts easier to understand.
It’s crucial for first home buyers to fully understand all adjustments when they receive their final settlement statement to avoid any surprises on settlement day.
1. Understand Additional Costs:
Beyond the deposit and purchase price, be aware of any extra costs that could affect the final payment.
2. Start KiwiSaver Withdrawals Early:
Begin the process early to prevent delays, as KiwiSaver funds are often crucial to your equity.
3. Check Bank Transfer Limits:
Ensure your daily transfer limits align with what you need to pay on settlement day to avoid any last-minute issues.
Watch the Video: Click here to watch our example video for the settlement statement.
Watch the Video: Click here to watch our example video for the statement of account.
