Subject to Finance

Is your contract “subject to finance”? How many days should the finance period be? If you are asking this question, this article will be very relevant for you.

Buying and Selling with “Finance” condition

If you are buying, and if you are borrowing money from a bank or financier, you should make sure that your contract is “Subject to Finance”. That means your contract should have a “Finance condition” in it. This gives you the right to terminate the contract, without penalty, if your finance is not approved.

And if you are selling, you will obtain a right to terminate the contract only if the buyer does not notify you regarding their finance approval before the finance deadline.

Length of Finance condition

There is no legal requirement as to how long the finance period should be. If you contract is subject to finance, we generally recommend that 14 days should be sufficient.

Most reputable financiers are able to approve your loan application within 14 days. If your bank or financier can’t do that, then you might need to request for 21 days or even more, subject to the seller’s agreement.

Quite often, a seller may request 7 days finance period. You should first consult with your bank or financier as to whether they can process your loan application within 7 days. In our experience, if you have obtained a loan pre-approval, 7 days should be enough.

You need to contact your bank or financier to proceed with the loan application immediately once you signed the contract.

These are very general advice only. Please feel free to book a free initial consultation with us and we will advise you in detail suiting your own unique situation!

Is your Contract “subject to Finance”?

Which bank should I use?

We do recommend that you use reputable banks to fund your purchase. It is not just about money, but it’s also about services.

The more reputable banks and financiers will be able to take good care of your financial situation. We have heard horror stories from our clients regarding their bad experience with bad financiers, and it’s always costly to be involved in legal disputes.

We are partners with Australia’s top 5 banks and we would be happy to refer you directly to a banking manager of your language.

What should I do if my contract is subject to Finance?

  • You must take all reasonable steps to obtain finance approval. Contact your bank or financier to proceed with your loan application as soon as you signed a contract.
  • Even if you have obtained a pre-approval, you should still put a Finance Condition into the contract. This is because “pre-approval” does not lead to 100% guaranteed final approval. A contract without finance condition is more competitive when negotiating with a seller, but you should understand the risks involved and make an informed commercial decision.
  • Your bank or financier will require you to sign loan documents. If you are planning to travel, please make sure that your bank documents are taken care of before you fly away!
  • As your lawyer, we will notify the seller of your finance approval before the deadline. You need to obtain an approval letter from your bank and send us a copy.
  • Tell your bank our contact details. We will directly liaise with your bank and arrange settlement with them.

Talk to our Conveyancing Lawyers

Please contact us and speak to our conveyancing lawyers. We will be able to guide and protect you through your conveyancing.

Our phone number is 07 3344 2888. Or email us at info@timeslawyers.com.au.