What Does ‘Subject To Finance’ Really Mean?

The vast majority of people who look to purchase property will do so with the help of finance.

If you need to use finance to purchase a property, then you certainly need to consider including a ‘subject to finance’ clause in your offer.

A subject to finance clause is a condition that is attached to the offer which effectively means the transaction will go ahead if the buyer is able to get finance for the purchase of the property.

There are also other common conditions that most buyers will use on the purchase of a property, including being subject to a building and pest inspection or subject to a satisfactory valuation. These are all measures that are put in place to protect the buyer to some degree, most of which are considered standard and aren’t likely to impact the strength of your offer.

How Does a Subject to Finance Clause Work?

It’s always a good idea to speak to a mortgage broker well in advance of putting an offer in on a property.

In reality, it is best that you have also taken this one step further and received a pre-approval from a lender. This not only gives you the confidence that you are going to be able to get finance on a purchase, but it will also give you a very clear indication of how much you can actually spend – including all acquisition costs.

A pre-approval can also make your offer stronger in the eyes of the selling agent who is ultimately paid when the transaction goes through. 

It is also important to understand that a pre-approval isn’t a loan. You still need to make an offer subject to finance and will also need to receive a satisfactory bank valuation – which is why these two conditions go hand-in-hand. 

Each state has slightly different procedures in place around the offer and acceptance process, with some that are heavily focused on using auctions over private treaty sales. While some states also have cooling off periods.

If you put in an offer that is subject to finance and you are running out of time to secure your finance, you will need to get your solicitor to inform the sales agent in writing to get an extension. If you don’t, you could potentially lose your deposit.

Finance is arguably the most important part of the property buying process because without it you can’t move forward.

Being organised and getting pre-approved will put you in the strongest position to acquire the property you want and to make sure the transaction goes through without a hitch.

If there is anything we can do to support you in your property buying journey, please contact us.

This is general information only and is subject to change at any given time. Your complete financial situation will need to be assessed before acceptance of any proposal or product.

*This information is general in nature and does not take into consideration your individual circumstances. Please contact us for further information.