Subject to Finance Clauses in Victoria – Buyer Guide + Sample Wording
📍 Protecting Yourself When Purchasing Property with a Home Loan
Buying a home in Victoria? If you're relying on finance to complete the purchase — even if you already have pre-approval — you must include a subject to finance clause in your contract.
This clause protects your deposit if the bank changes its mind or refuses to lend on the property.
🔍 What Is a Subject to Finance Clause?
A subject to finance clause makes the contract conditional on you obtaining loan approval from your chosen lender. If you don’t receive that approval by the deadline, you can cancel the contract and get your deposit back.
In most standard Victorian contracts (like the REIV version), this appears as General Condition 3.
But don’t rely solely on the default wording — many buyers need a custom clause that clearly spells out the finance amount, lender, and deadline.
⚠️ Why You Should Always Include This Clause
Even if you’ve already received finance pre-approval, your bank can still withdraw funding — especially if they:
Don't like the condition of the property
Are unhappy with the valuation
Discover issues with zoning, flooding, or planning overlays
“Even if your finance is technically approved, always include a subject to finance clause if you're relying on a home loan. Lenders can pull out if they don’t like the property, and you could lose your entire deposit if you're unprotected.”
— David Dawn, Licensed Conveyancer – Victorian Property Settlements
📄 Sample Subject to Finance Clause (Template You Can Use)
You can ask for this to be inserted into the contract or added as a special condition:
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This contract is subject to the purchaser obtaining unconditional approval of a loan from [Bank/Lender Name] for an amount not less than $[Loan Amount] on or before [Date]. If the purchaser is unable to obtain such approval and gives written notice to the vendor by that date, the contract will be at an end and the deposit refunded in full.
Need help adapting this for your situation? Contact us here »
📆 What Finance Date Should You Choose?
Most contracts use a 14-day finance clause, but depending on your bank and broker, you might need 21 days or longer.
✅ Avoid setting the finance date on a Friday. If anything goes wrong, you’ll lose two days over the weekend.
Ask your broker what timeline is realistic — then pad it slightly.
📎 What Evidence Must You Provide?
If your finance falls through, you'll need to show you genuinely applied and were declined.
That includes:
A letter or email from your bank stating the loan wasn’t approved
A written request to end the contract within the deadline
⚠️ If you do nothing by the finance deadline, most contracts treat your silence as a waiver of the condition — meaning you're locked in, even if finance fails later.
❓ What If You Miss the Deadline?
If your approval is delayed and the deadline is looming, you must request an extension in writing before the due date. The vendor can say no — but at least you’ve preserved your rights.
If you miss the deadline and don’t notify the vendor, you’ll usually lose the protection and the contract becomes unconditional.
💡 David’s Advice
“Most people don’t realise how fragile loan approval can be. Banks have refused funding at the last minute because the property had issues — like poor drainage, flammable cladding, or zoning risks.
If you're relying on finance to settle, even with pre-approval, use the clause. It’s your safety net.”
📲 Need Help Before You Sign?
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🧭 Related Guides:
Statement of Adjustments – Explained
For Vendors/Sellers
When a Purchaser has made a formal offer to purchase and has requested the sale be subject to a satisfactory finance approval it is quite natural to feel like the purchaser isn't fully committing, however in most cases this is a sign the purchaser is genuine in their intent to purchase, and is willing to incurr expenses on the transaction.
It is also quite common for purchasers to under estimate the time requied for thier bank to get back to them and to request an extension. This is often due to being given wrong advice or lender back logs, which has incresed since the royal comission into banking practices.
For Purchasers/Buyers
It is important that when purchasing a property you undertake all relevant checks and enquires about the property, they should also ensure that where they are relient on finance from a third party they have adequetly provided for this in the offer.
It is especially important that purchasers are aware that they do not have any rights to finance approval clauses in auction contracts.
It is not simply enough for a purchaser to have this clause, but that it adequately provides for the following details;
amount required (including costs)
time required for approval (as there is no guarantee that you will get a extension, despite it being quite prevalent. it is always better to be realistic rather than commit to something that isn't within the realm of possibility)
your lender of choice
This function also requires you to have acted reasonably and prudently, it is not enough just to apply and be rejected to end a contract. IN many cases you are required to provide documentation that you applied within the scope of clause you asked for. For example; if your clause provided for finance approval of $300,000 and you applied and were rejected by a lender for finance of $350,000, a vendor has every right to refuse your request to end a contract and return the deposit to you.
For this reason it is important that you get specific advice from our office prior to making an offer.