How to Use a Finance Condition Without Losing Your Deposit
How to Use a Finance Clause Properly — and Why So Many Buyers Still Lose Their Deposit
Adding a “subject to finance” clause to your contract might seem like ticking the safety box — but it won’t protect you if you don’t understand how it actually works.
In Victoria, finance clauses are strict. You must meet specific obligations on time, in writing, and for the right reason — or you could lose your deposit, even if your loan was never approved.
At Victorian Property Settlements, we help buyers make sure their finance condition is properly worded, properly managed, and properly enforced — before the deadline hits.
Here’s everything you need to know.
What Is a Finance Condition?
A finance condition is a clause in the Contract of Sale that gives the purchaser a fixed period of time to obtain loan approval. If the loan is not approved by the deadline, and the right notice is given, the purchaser can withdraw from the contract without penalty and recover their full deposit.
In Victoria, the standard finance clause is set out in General Condition 20 of the LIV/REIV contract. But many contracts now delete, vary, or replace this clause — often in ways that weaken your protections.
That’s why every contract must be reviewed before you sign.
How the Standard Clause Works (General Condition 20)
Under General Condition 20, the purchaser agrees to:
✔ Apply for a loan immediately through an authorised lender.
✔ Do everything reasonably necessary to obtain loan approval — including providing documents and answering lender queries.
✔ Notify the vendor in writing by the agreed finance date if approval has not been obtained.
If you fail to give written notice by the finance deadline, the clause is automatically waived, and the contract becomes unconditional — even if the bank hasn’t made a decision yet.
Where It Goes Wrong — The 4 Most Common Mistakes
1. Missing the Deadline
Most finance conditions require approval within 14 or 21 days from the date the contract is signed. If you don’t notify the vendor in writing by the due date, your rights are lost.
Even if your bank is still assessing the application, or hasn’t provided formal approval, the silence may be treated as acceptance — and your deposit is now at risk.
Example:
Contract signed on 1 September with finance due 15 September.
No notice given by 5:00pm on 15 September.
→ Clause is waived. Contract is now binding. No second chance.
2. Failing to Notify in Writing
Telling the real estate agent doesn’t count.
Calling the broker doesn’t count.
Even sending an email to the wrong person may not count.
The notice must go to the vendor or their conveyancer, in writing, and be received by the finance deadline.
We recommend:
– Using email with a read receipt
– Confirming the correct recipient
– Sending a copy to our office for records
3. Wrong Reason for Finance Failure
Most standard clauses only allow withdrawal if the loan is genuinely declined.
If you pull out for another reason — change of heart, changed banks, lost confidence — the clause won’t protect you.
Also risky:
Switching lenders mid-way
Delaying your application
Failing to provide information requested by the bank
Withdrawing before a formal decline is issued
If the lender didn’t refuse the loan, the vendor may argue that the condition was not triggered — and try to retain the deposit.
4. Assuming a Finance Clause Is Included
Many buyers wrongly assume that all contracts include a finance clause. That’s not true.
Auction contracts are usually unconditional.
Some private sales delete the finance clause entirely or weaken it with harsh deadlines and proof requirements.
If you sign an unconditional contract and later find out your finance isn’t approved — you are still required to settle.
Special Conditions: Where Finance Clauses Get Dangerous
Even when a contract includes a finance clause, we often see additional special conditions that silently change how it works.
These conditions might:
Require written rejection letters from a specific lender
Impose earlier notice requirements than General Condition 20
Set out specific wording for withdrawal notices
Include automatic waiver clauses if certain forms aren't used
Every special condition needs to be read carefully. Ask:
Who must give notice?
Where must it be sent?
When must it be given?
What happens if it’s not?
The “fine print” is often where buyers lose their protection.
Our Advice – What You Should Do Before Signing
At Victorian Property Settlements, we help buyers avoid finance-related contract disasters every day. Here’s what we recommend:
✅ Have the contract reviewed before you sign
We’ll confirm if the finance clause exists, whether it’s enforceable, and whether any special conditions change its meaning.
✅ Track your finance deadline from day one
Put the date in your calendar. Set reminders. Finance conditions don’t auto-extend — they expire without notice.
✅ Request an extension if needed — in writing
If your lender is running late, get us to request an extension before the deadline. Verbal agreements mean nothing. It must be written and agreed.
✅ Keep records of your loan application
Keep emails from your lender or broker showing you applied, provided documents, and followed up. If a dispute arises, this helps prove you acted properly.
✅ Send clear and timely withdrawal notices
If your finance is declined, we’ll prepare and send a formal notice that complies with the contract. Timing is everything.
✅ Consider a custom clause for extra protection
We can add a tailored clause that allows withdrawal if:
– The property fails valuation
– The lender requires unreasonable terms
– Your guarantor is declined
– The pre-approval conditions can’t be met
What If You’ve Already Signed?
If you’ve already signed and you’re not sure if the finance clause protects you, don’t delay. Every hour counts.
Contact us immediately and we’ll:
Review the contract wording
Check the finance deadline
Advise you on how to proceed
Prepare urgent notices or extension requests if needed
Remember: if the finance date passes without action, your ability to withdraw may be gone.
Need Help Now?
Whether you’re still reviewing a contract or already under pressure with your lender, we can help make sure your finance clause works as it should.
Click here to request a contract review
Victorian Property Settlements
Trusted by Victorian buyers and sellers for over 25 years
www.victorianpropertysettlements.com.au