How to Use a Finance Condition Without Losing Your Deposit

 
 

Adding a "subject to finance" condition to your Contract of Sale might seem like the safest way to protect yourself — but in practice, many buyers still lose their deposit due to poorly worded clauses or missed deadlines. Here’s how to use a finance condition properly in Victoria so it actually works for you.

What Is a Finance Condition? A finance condition gives you time to secure a loan to fund your purchase. If your loan is declined, the clause allows you to walk away from the contract without penalty — but only if strict conditions are met.

In Victoria, most finance clauses are based on the standard General Condition 20 of the LIV/REIV contract, but many contracts now vary or replace it.

How the Standard Clause Works (General Condition 20)

  • You must immediately apply for a loan.

  • You must do everything reasonably required to obtain approval.

  • If your loan is declined, you must notify the vendor in writing by the due date.

  • If you don’t notify on time, the vendor may treat the contract as unconditional — meaning your deposit is at risk.

Common Mistakes That Cost Buyers Their Deposit

1. Missing the Deadline: Finance approval is usually due in 14 or 21 days. If you forget to notify the vendor on time — even if you don’t have approval yet — the clause is waived.

2. Failing to Notify in Writing: Verbal updates to the agent are not enough. If you don’t give formal notice in writing by the due date, you’re exposed.

3. Loan Refused for the Wrong Reason: The clause usually only protects you if your loan is declined. A change of mind, switching lenders, or withdrawing your application may not be enough.

4. Assuming All Contracts Include Finance Conditions: Not every contract has a finance clause. If you’re going to auction or signing an unconditional contract, you won’t be protected.

Our Recommendations

At Victorian Property Settlements, we advise:

  • Always have your contract reviewed before you sign to confirm the finance clause is valid and protects your interests.

  • Request written extensions if finance approval is delayed — and make sure the vendor agrees in writing.

  • Keep records of your application, your broker’s progress, and any lender communication.

  • Make sure your notice of non-approval is clear, timely, and in writing.

We can also help insert a custom clause where needed, such as one that allows withdrawal if the valuation comes in too low or if you're unable to meet lender requirements.

What If I’ve Already Signed? If you’ve signed a contract and aren’t sure if your finance clause protects you, contact us immediately. Time is critical. We can review the contract and help you avoid making a mistake that could cost your deposit.

Need Help Now? Click here to request a contract review or speak with our team today.

Victorian Property Settlements – Trusted for over 25 years by Victorian buyers and sellers. Visit: www.victorianpropertysettlements.com.au