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Should I buy “Subject to Finance” in Victoria?

Should I buy subject to finance? When purchasing property in Victoria, a Subject to Finance clause is a possible option for Private sales. On one hand, it will certainly protect your interests, especially if your finance has not yet been approved. On the other hand, it may weaken your bid when making an offer to the agent. Here’s what you need to know:

When can I buy Subject to Finance?

Subject to Finance only applies to Private Sales

In private sales, you “tick a box” in your standard Contract of Sale. This is not possible for Auction Sales. In private sales, the standard Contract of Sale includes an option to make the purchase “Subject to Finance.” You simply need to select this condition when signing the contract. However, this protection is not available for auction sales, so you must have your finance fully approved before bidding at an auction.

If your finance has not been approved, including a “Subject to Finance” clause is highly recommended. Without it, you risk being locked into a contract that you may not be able to pay for.

I didn’t tick “subject to finance”. What happens now?

Once you’ve signed a contract without a “Subject to Finance” clause, you cannot add it later. The contract may still be subject to the statutory cooling-off period (usually three business days), but this is not the same as having full protection under a Subject to Finance clause.

After buying Subject to Finance:

How can I get out of the contract?

In most cases, when signing ‘subject to finance’ the Purchaser can only end the contract if they:

1. Applied for the loan, and
2. Did everything ‘reasonably required’ to obtain loan approval, and
3. Serve written notice ending the contract (together with written evidence of rejection/non-approval of the loan) on the vendor within 2 clear business days after the approval date or any later date allowed by the vendor, and is not in default under any other condition of this contract when the notice is given

Source: Law Institute of Victoria (LIV), Standard Form Contract of Sale Particulars 2024

What can I do if my finances are rejected?

If, having made immediate and proper Application for your Loan, your Finance is still not Approved by your “Subject to Finance” date, you have the following choices:-

- Terminate the Contract (any Deposit Paid should be returned to you immediately)
- Request an Extension of the Loan Approval Date – noting that if the Vendor’s Conveyancers do not respond by Midnight at the end of the Loan Approval Date, or they refuse that Extension, unless you have by then Terminated the Contract, it will no longer be subject to that protection for you
- Waive your “Subject to Finance” (and the Contract immediately is no longer subject to that protection for you)
- Source: Australian Institute of Conveyancers (Victoria), Member’s Newsletter 2024 (AICVIC)

This article is intended to provide general information only. It does not have regard to the financial situation of any reader and must not be relied upon as legal advice. Please seek financial advice before making any decision based on this information.‍

Remember – at Conveyancing Excellence, we’re here to help. So please call or email us should you have any questions about your finance clause or your purchase in general.

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