Key Things You Should Know About Buying ‘Subject to Finance’

Image of a Home Purchase Contract Being Signed with subject to finance clause

Not sure if you’ll get approved for a home loan? But you really, really like that house that just hit the market? Making an offer ‘subject to finance’ might be the right move for you. Here’s how it works.

Picture this: you’ve found a home you’re crazy about, and you don’t want to lose it to another buyer. So, you sign the contract and hand over your deposit.

Things are getting real now. But what if they’re not? What if you struggle to get home loan approval?

It’s a scenario every home buyer dreads.

If you have to back out of the contract because you can’t get loan approval, you could lose your deposit.

One possible solution, however, is to make your offer ‘subject to finance.’

What Does ‘Subject to Finance’ Mean?

In practical terms, making an offer subject to finance means adding an extra clause to the sale contract.

Essentially, it allows the buyer to walk away from the sale with their deposit intact if mortgage finance can’t be arranged within a set timeframe.

Understandably, the seller won’t wait around forever. So, the time allowed to secure loan approval can be tight, often just a few days.

However, a ‘subject to finance’ clause could help you avoid a last-minute scramble for finance – a pressure-cooker situation that could see you accept a loan or lender that’s not right for your needs.

Potential Drawbacks to Consider

There is a catch to making an offer subject to finance: the seller doesn’t have to agree to it.

In today’s property market, homes are selling fast – in as little as 10 days in some neighbourhoods.

With that sort of buyer demand, there may not be much incentive for a seller to agree to an offer that’s subject to finance.

Or, if you’re buying at auction, the sale is usually unconditional. Chances are you won’t have an opportunity to alter the sale contract.

These drawbacks highlight the value of speaking to us before you go house hunting.

Having your loan pre-approved, for example, can take away a lot of the uncertainty around securing finance.

Timing Your Buy and Sell

When you’re ready to climb the property ladder, another key question is often whether it’s better to sell first and buy later.

With money in the bank from the sale of your old home, you may be less concerned about making an offer subject to finance.

That said, if you see a place you want to buy before your home sells, a bridging loan could cover the funding gap.

The beauty of a bridging loan is that this type of finance usually requires interest-only payments, not principal and interest payments.

The downside is that the interest rate tends to be higher than for a traditional home loan.

Let’s Discuss Your Options

There’s a lot to plan for when you’re buying your next home.

Call us on 1800-E-LOANS to streamline your purchase. From subject to finance offers to bridging loans, upgrading can be a lot less stressful when you know your options.

1800 35 62 67

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Join our newsletter today to get our latest lending and finance tips right in your inbox!

We promise we’ll never spam! Take a look at our Privacy Policy for more info.