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  • Sonya Lee

What is "subject to finance" ?

Updated: Nov 15, 2023

A jar with money, represenation of finance

When you buy a property, the first step is always to calculate whether you will have enough money to actually buy it.

Usually, the funds aren't just sitting in your Bank account, you will have to go through the process of borrowing the funds from an accredited lender.

This is where you might see the term "subject to finance" in the contract. This means that the sale is conditional on you getting a loan from a bank or another lender. If you can't get a loan, you can cancel the contract and get your deposit back. This gives you some protection in case your financial situation changes or the lender rejects your application. The difficulty when entering into a Contract with a "subject to finance clause" is that you are never sure exactly how long the Bank might take to provide you with that unconditional finance approval. Traditionally finance clauses are from 7 to 14 days from the date of exchange of your Contract.

Subject-to-finance clauses are common in property contracts, but they are not always straightforward. You need to make sure you understand the terms and conditions of the clause, such as how long you have to secure finance, what evidence you need to provide, and what happens if you breach the clause.

You also need to be careful not to waive your rights under the clause by doing something that implies you have finance, such as paying the full deposit or signing an unconditional contract.

If you need more information on how to protect yourself financially when purchasing a property, don't hesitate to book a free 15-minute consultation.

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